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Non-QM tends to thrive in a counter-cyclical market

Excelerate Capital CEO explains why he’s confident non-QM will continue to grow despite downturn

Non-qualified mortgage (non-QM) loans have grown more popular with brokers and lenders. However, challenges are emerging. As inflation woes and rising borrowing costs persist, even the booming non-QM sector faces margin compressions due to reduced purchase and refinance loan volumes.

“Whenever there’s a margin compression game, that means that we’re coming out of a cycle and going into a new cycle. We just came off of one of the largest refi booms in 2020 and 2021,” said Excelerate Capital CEO Thomas Yoon. “And now we’re in a purchase market environment with margin compression, and what that has when that happens, our industry tends to shrink down and we right size. That is a problem everyone will face in our industry, and Excelerate Capital is no different.”

Despite the current economic climate, the CEO said he is confident that non-QM will continue to thrive, reflecting the sector’s sentiment.

“My sentiment is not just of my own, but most of the industry,” Yoon said. “Industry, economists and forecasters and executives all believe that non-QM is one of the product sectors that will continue to grow in our current market.

“I think that one of the differentiators for us is that most of our production is done in non-QM, and non-QM is an outlier product that historically tends to thrive in a counter-cyclical market like we’re in now.”

To find out Yoon’s advice to originators who wish to get started with non-QM, listen to his full MPA Talk podcast interview here.