Non-QM is seeing higher uptake as homebuyers and owners grapple with rising borrowing costs
Mortgage brokers and lenders are seeing more customers move to non-QM loans and away from agency loans. They believe it is not a tightening of credit boxes hurting agency loans, but economic conditions making it harder for borrowers to qualify for conventional loans.
Max Slyusarchuk (pictured top left), CEO at A&D Mortgage, LLC, believes the unknown future of Fannie Mae and Freddie Mac is leading to higher rates for conventional loans.
“Currently, the mortgage market is speculating what would happen to Fannie and Freddie if and when they may be returned to the private market,” Slyusarchuk told Mortgage Professional America. “While any reform will be implemented slowly and surely to minimize risk to the American taxpayer, non-QM is benefiting from higher interest rates due to its stabilized market.
“Any credit tightening is not due to GSE reform and is happening on a lender-to-lender basis.”
Phil Crescenzo Jr. (pictured top right), vice president of the Southeast division at Nation One Mortgage Corporation, believes that it isn’t Fannie or Freddie tightening qualifying, but that borrowers are struggling to meet debt-to-income qualifications. This is due to economic turmoil and borrowers turning to non-W-2 income.
“There have not been any major lending changes to approval guidelines recently that would cause an increase in non-QM lending,” Crescenzo told Mortgage Professional America. “Overall budgets are being strained. Also, additional documentation sources like alternative income, gig incomes, and bank statement income for a small business are all categories that don’t fit in traditional conventional income guidelines.”
Underwriters can get more conservative in economic turmoil
While Crescenzo hasn’t seen any changes regarding income and qualifying with agency loans, he does believe that when there is turmoil in the economy, underwriters may lean more conservative when calculating income.
“When the economy is pressured due to inflation, higher rates and/or additional consumer debts for a longer period of time, it’s not uncommon for underwriters to lean more conservative in regards to viewing over time, bonuses or continuation of bonuses in addition to a base income,” he said.
He believes that a bigger impact on the current push for non-QM loans is the variety of income that borrowers bring to mortgage applications.
“Increased equity gains in recent years, and more unique income scenarios and challenges,” Crescenzo said. “Also, higher rental incomes are fueling DSCR-type loans, which are qualified based on property income.”
Even with the current challenges, Crescenzo believes there are deals to be made. The excess number of sellers on the market is providing opportunities, whether with Fannie and Freddie or on a non-QM product.
“Clients are still anxious and affordability is a challenge, but sellers are being more realistic, and offering concessions and price discounts more frequently,” he said. “There are many great buyers out there, but higher expectations and a much higher mortgage IQ are needed to properly navigate it.”
He believes simple communication is key when dealing with hesitant buyers or clients needing a non-agency solution.
“Educating clients in a simple way they can understand is helpful,” Crescenzo said. “Consistent engagement on new offerings and how it applies to the individual scenario, instead of an overload of information available that does not apply. Proper communication is key.”
Looking for influencers to help
It’s been a big year for Slyusarchuk and A&D Mortgage, which acquired Mr. Cooper’s wholesale and non-delegated correspondent origination business in April.
He said one advantage in the non-QM space is the ability to hold off on securitizing loans until market conditions are more favorable.
With 30-year mortgage rates near 7%, Ben Fertig, President of Constructive Capital, notes a growing trend of brokers turning to non-agency and residential investor loans. These loans are proving more "rate resistant" due to investor demand. https://t.co/dkiY0kv6r8
— Mortgage Professional America Magazine (@MPAMagazineUS) June 5, 2025
“We don't have to securitize the loan right away,” he said. “We can wait and offer non-QM bonds in the market only when market conditions are suitable. This is huge for the smaller brokerages that need the warehouse funding.”
Slyusarchuk is also looking for new ways to attract younger customers. He suggests that brokers who might be struggling in the current environment to meet young buyers where they are: on social media.
“Know your social media influencers,” Slyusarchuk said. “Millennials and Gen Z gravitate towards influencers who speak in quick videos in relatable language. Adopt these strategies.”
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