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For a good summary of diverging prospects of agency and non-agency mortgage lenders, we recommend reading the recent Wall Street Journal article entitled “In the Coronavirus Economy, the Only Safe Mortgage is a Government-Backed One.”
The article explains how the central bank’s decision to purchase unlimited amounts of government-backed mortgages ensures the stability of conventional 30-year consumer home loans. However, the individuals and investors who do not qualify for conventional loans are left scrambling, and private lenders around the nation are suspending operations.
That is because these private lenders rely on warehouse lenders to provide lines of credit for funding. Yet, warehouse lenders recoup their funds when the mortgage lender either sells their loans to investors or refinances them in the securitization market. In these times of economic uncertainty, warehouse lenders are unsure of their ability to sell or refinance their loans, and therefore are pulling back and/or becoming more selective on what they fund.
Many of Visio’s most experienced customers are self-employed, either partially or fully as real estate investors. These customers depend on non-agency mortgage finance not only for their personal residences but also to finance their portfolios of rental properties.
For those investors depending on non-QM lenders such as Visio, there are several factors we are monitoring to determine when funding can commence. See our post by CEO Jeff Ball “Loan in Limbo Due to COVID-19? Here's a Road Map to Funding” for greater detail. And be sure to read the full Wall Street Journal article for a more in-depth analysis of the current state of non-government backed loans.