During this pandemic we have seen some commercial banks shut down in days. We have seen aggressive lenders stop answering calls, we have had clear to close loans, go to dead deals. What happened?
Many of the NON QM and commercial lenders that were aggressively pursuing these type of loans, were MBS sellers. MBS- Mortgage Backed Securities- they would package loans in groups and sell them to wall street firms. ( more on that on another Blog) Wall street firms are always looking for investments that give them “yield” returns on their money.
When the announcement of COVID 19 was made and mortgage payments were announced to be “optional” – “the appetite” for this type of investment all but disappeared. The national lenders, that were aggressively marketing to lend, lost their ability to sell they mortgages and their “liquidity” dried up, their ability to lend money and get that money replaced was gone.
This works in the same manner, as Fannie Mae, Freddie Mac, FHA. The bank may lend you the money, but that money gets replaced by the GSE (government Sponsoring Entity) so that the bank can then lend more. So everyone is related on the loan from the borrower to the broker, to the lender to the GSE. ( you, mortgage broker, the bank lending the money, Fannie, Freddie, FHA)
That being said, all is not lost, there are “portfolio lenders” – Banks and investor groups that lend their own money. They may be a little more expensive at this time. But business can be done. You need the right relationship to be able to write those loans.
HGRN is a proud portfolio lender and Private equity broker. So we have access to money and can still close your deals. We do the MBS lending as well, but we were not exclusively dependent to it. Relationships over transactions.