Subprime Spin Doctors and Clickbait
And there we have it. A major news publication outing the mortgage industry for "liar loans". Don't you just love alliteration? I get that newspapers need sexy stories to sell their sexy online newspapers, aka clickbait, but at what point does it poison an unaware reader's mind instead of enriching it?
In the article, available on wsj.com and sfgate.com, the alarm is sounded because Non-QM volumes are near a ten year high, and we all know what happened ten years ago. So to the uninitiated, it would appear that the mortgage industry is back to its dirty tricks that will push the country – no, the entire global financial system – into the abyss.
But we in the industry know that Non-QM lending of today is a far cry from the heady days of 2004. Gone are the NINJA loans, the 125% LTV loans, the piggyback 0% down combo loans. You no longer see 22 year old loan officers tooling around in Lamborghinis or people waiting in lines to buy million dollar condos like they were the latest iPhone.
In fact, the article dedicates only one measly paragraph to mention that Non-QM lending makes up only a fraction of overall mortgage lending. In 2018, only 4% of total originations were considered Non-QM. If mortgage lending were analogous to driving a car and you drove at the speed limit 96% of the time, would you be considered a crazy, out-of-control, thrill-seeking reckless driver?
While the article does give ample space to real-life anecdotes of how Non-QM loans are used in a sensible manner by actual borrowers, it still leaves the reader with a sense of unease. It's almost disingenuous that the writer leaves out the fact that 'subprime' lending existed way before it was considered a dirty word and were seen as a perfectly acceptable way to provide non-traditional borrowers with the opportunity to buy a home or relieve financial pressures.
The fact is is that there is a way to provide Non-QM lending that is sensible, practical and minimizes risk while providing opportunities to borrowers that don't fit in the QM box. Anyone who lived through the subprime crisis knows that there were many bad actors. I'm not going to point any fingers because that's pointless now. What needs to happen is that the mortgage industry should educate the general public that Non-QM lending is not subprime lending 2008 redux.
Ok, done with my rant.