Non-QM Market Expected to Double or Triple in 2018

S&P Global Ratings released a forecast predicting that the market for non-QM mortgages will grow next year, according to an article in HousingWire. After studying six rated non-QM deals, S&P noted that non-QM loans today are more conservatively underwritten than pre-crisis subprime loans and have increasingly positive market potential, especially considering the fact that many homeowners are otherwise unable to obtain home financing through conventional channels.

The report stated, "Given improved underwriting, ostensible off-setting risk factors, and wide spreads, it appears as though non-QM lending should give rise to a healthy new market that provides funding for would-be borrowers who have been on the sidelines for years, having been unable to qualify for a conventional loan." The report predicted "the non-QM market to double, or even triple, in size in 2018. We also think that as it continues to evolve and become more liquid, securitization will become more efficient and spreads should tighten."

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