Optimal Blue's O'Connell expects growth beyond the category's current 12% share of locks
It’s been the perfect storm in 2026 for the rise of non-QM lending, and numbers show its use continuing to increase.
Some brokers reported non-QM loan rates beating conventional on certain transactions. Others cited the need to serve a wider range of borrowers, many of them bringing non-traditional income sources to the table.
September data from Optimal Blue shows just how big an impact the broker community had on the continued surge of non-agency products. It also showed how liquidity to fund these loans continues to be strong.
Brennan O'Connell (pictured top), director of data solutions at Optimal Blue, said non-QM makes up a bigger share of activity in the broker channel. Optimal Blue's September report put non-QM at 12% of rate locks across all channels.
"There's more and more investors coming online who are making it available," O'Connell told Mortgage Professional America. "It's actually more popular too, in the broker space."
Brokers search for it more
Optimal Blue's monthly lock data covers every channel. Conforming share fell 71 basis points to 46% in September while non-conforming share rose 285 basis points to nearly 24%, according to the report.
Compared with a year ago, non-conforming share was up nearly 7 percentage points. For brokers, though, O'Connell said, the company sees searches, which show what brokers are pricing and not what closes.
"If you look at the non-QM searches in Loansifter, it's actually about double that," O'Connell said. "So basically one in four searches on Loansifter, which is the broker space, is non-QM."
Loansifter, Optimal Blue's pricing engine for brokers, handles about a million searches a month from roughly 6,000 brokers, he said. Each search pings well over 100 wholesale lenders, and Optimal Blue believes it covers nearly all the large ones.
"All of the wholesale lenders of size are putting their rate sheets onto Loansifter because it's such a big platform, you sort of have to be on there if you want volume from these brokers," O'Connell said.
The product mix across all channels has held steady, he said, with investor and debt service coverage ratio (DSCR) loans at 33% of non-QM activity in September, bank statement loans at 30% and other programs at 37%, according to the report. Brokers carry a bigger share of non-QM than retail does, he said, so the growth of the channel is helping drive the category.
"They're going to go wherever the business is," O'Connell said.
What is behind the growth
Non-QM's share of locks is up 478 basis points from a year earlier, and its volume rose 8% in September while total volume fell 2%, according to the report. It was a negligible share in 2021 and 2022, O'Connell said.
Some of the demand was always there, he said, from borrowers without W-2 income.
"You have the gig economy where people are not having W-2 incomes, and then you sort of aren't going to qualify for a traditional mortgage, and so you need some alternative financing, and a bank statement loan makes a lot of sense at that point," O'Connell said.
What changed is the supply side. Five years ago, originators had plenty of agency volume.
"There was so much volume to be had for originators that was just your bread-and-butter agency 30-year fixed loans," O'Connell said. "If you go back five years, there wasn't the appetite. The supply side wasn't necessarily there. But I think as some of that has eroded, you're just seeing more and more folks move into the non-QM."
Real estate investors are another piece, he said, and he pointed to single-family rental buyers.
"They're in a position where they might have more cash than a homeowner. They might be a little bit more flexible to make a purchase," O'Connell said. "They're building a business instead of a homeowner who's contemplating, 'Do I sell my home that's locked in at 2% mortgage? Well, I can stay.' So you have the lock-in effect, and then the investor becomes a more likely borrower."
While he expects non-QM volume to level off at some point, that may not happen anytime soon.
"It'll certainly settle into some equilibrium," O'Connell said. "I don't know what that is. I guess my expectation is that we will see it grow for some time. I don't think 12% is the ceiling."
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