How to manage the complexities of non-QM and private lending

Gregory Meola, managing director, head of business development & strategy, Acra Lending

Rather than formulaic QM lending, non-QM lending can be more complex. Setting up systems to handle these complexities takes significant time and effort, but once completed, provide a tailored loan program for a borrower. Gregory Meola, managing director and head of business development & strategy for Acra Lending explains the process and how technology can be a boon to streamlining the process.

HousingWire: What are the unique complexities of non-QM lending as compared to QM loans?

Gregory Meola: QM lending tends to be more formulaic than non-QM lending and requires the ability to analyze a greater variety of income types. In addition, non-QM lending generally allows for credit events that are not normally seen in QM lending. Also, greater reliance is placed on the appraisal of the property to ensure that the value is sound. Because there are so many more options available in non-QM lending, lenders must have a multitude of lending programs and income documentation options, but also still respond to their referral base timely. Setting up systems to handle these complexities takes significant time and effort, but once completed, provide a tailored loan program for a borrower.

HW: How have these challenges affected the broker and borrower experience with non-QM?

GM: While both QM and non-QM lending are related to lending on residential properties, the processing of these loans has some significant differences. Many customers may think that the processing of the loan will be similar to a conventional loan. Most non-QM loans; however, are manually underwritten. 

Additionally, there may be some extra requirements on either the review of the appraisal or the borrowers’ credit history. While there are more options regarding income documentation, there are also other steps that are necessary.  Because of this, it is important to set expectations about the process and what it entails early in the process so that there are no surprises. This leads to a better overall experience for the customer.

HW: How can technology simplify and add transparency to the non-QM lending process?

GM: Certain processes in qualifying a non-QM loan are very similar to the automated process of QM. By replicating those automated processes into the non-QM process, we can create speed and efficiency for our broker partners with tools that they are familiar with from doing QM business. 

Additionally, by adding in more transparent features to the portal, we can communicate faster with brokers to resolve issues and give them a clear view on what the status of a loan is and/or what is needed to progress the loan to closing.

HW: What can you tell us about the future of Acra’s Glide Portal?

GM: The future of the Acra Glide Portal is evolving. We are working internally and externally to create efficiencies where there are inefficient steps in the process. We have already started working on a Phase 2 roadmap with feedback from internal and external users. Our plan is to use this portal to create a similar user experience most of our brokers have with their QM partners. Our goal is to create a seamless user experience transparent to the broker in order for us to best serve our broker partners and for them to serve their customers. 

To learn more about non-QM and working with Acra Lending, visit https://acralending.com/.

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