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Is investor appetite for non-QM changing?

HousingWire chats with Steven Schwalb, Managing Partner of Angel Oak Lending about the changes investor appetite for non-QM products.
The post Is investor…



In 2022’s changing market, non-QM has been a hot topic for many. HousingWire recently caught up with Steven Schwalb, managing partner of Angel Oak Lending, about the changes investor appetite has gone though for non-QM.

HousingWire: What is the investor appetite for non-QM and how has that changed over the past few years?

Steven Schwalb: The investor appetite continues to be strong even in today’s volatile market. Non-QM securitizations had their biggest supply year on record in 2021 and we are still hitting records today. In fact, in the first quarter of 2022, non-QM securitizations totaled $11 billion. Of that volume, $6.2 was in March. March just so happened to be a record month for Angel Oak as well.

As a leader in bringing back this asset class, we have continued to see more and more investors look to non-QM. One common criticism of these loans in the past was that they were not stress-tested and no one knew how they would perform under those conditions. Well, the COVID pandemic brought about economic conditions that tested the performance of non-QM and they came out quite well. Since then, we have seen more and more insurance companies and money managers become interested in investing with Angel Oak and the non-QM space. This bodes especially well for the future and non-QM’s anticipated growth.

HousingWire: With so many new lenders getting into non-QM, why is it more important than ever to work with the right non-QM lender?

Steven Schwalb: Non-QM is where we play, and we have laid a solid foundation as the leaders in non-QM. Angel Oak Mortgage Solutions focuses exclusively on non-QM and we have been setting records in volume. As an organization, Angel Oak has originated over $12B in non-QM. Recently we have seen an increased focus on non-QM, which has led a number of Agency lenders attempt to get into the space.

Since there are so many more options, it is more important than ever to work with the right firm. As we always say, wouldn’t you rather work with someone who has done 10,000 non-QM loans rather than 10? The key is to understand the important questions to ask. How long have they been doing non-QM? What percentage of their overall business is non-QM? What is their origination model? Do they need a pre-closing investor review? Those are but a few important ones.

Choosing the wrong lender puts not only your reputation at risk, but the relationship with your referral partner as well! What happens when the lender tells you they can do the loan with 20% down and then at the last minute, their end investor says no? They come back saying the borrower needs to put down 30%. We’ve heard many stories of that happening. How does that impact your relationship with that referral source? These examples do not happen at Angel Oak. Our vertical integration means our affiliate, Angel Oak Capital Advisors is the end investor. We know what they’re looking for when we issue a pre-qual, and we stand behind that. This relationship allows us to write our own guidelines and quickly update them based on market conditions. Our model is to originate to retain, not to sell. As well, we do not have to seek third party approval to do a loan – we are the end investor. Surety of execution, consistently enhancing guidelines and offering flexibility through our non-QM products sets us apart. Make sure to ask lenders you are considering these types of questions.

HousingWire: Non-QM is expected to grow significantly in 2022, where is that growth going to come from?

Steven Schwalb: A couple of areas. First, with increased education and awareness, more originators are beginning to offer non-QM. That means more opportunities for these underserved borrowers to qualify for a loan.

Second is from the significant growth in the number of borrowers who need it. Increased fees from the GSEs for second homes and high balance loans have borrowers looking for more affordable options. There is also a large population of self-employed in the U.S. today. Self-employed borrowers often need Bank Statement loans because they can’t qualify using tax returns. The Department of Labor estimates 30% of the U.S. workforce is self-employed. That is around 59 million people including gig economy workers. And this demographic continues to grow at a rapid rate. We also work with originators who close deals for real estate investors who own many properties and need options outside of Agency.

HousingWire: How have the changes in the agency space (GSEs/FHFA) impacted non-QM?

Steven Schwalb: A couple of changes have impacted the non-QM space. First, stricter guidelines including condos have caused more borrowers to fall out of Agency. We are seeing more condos deemed non-warrantable and we are helping originators with these fall-out scenarios. As well, Agency has increased fees for second homes and high-balance loans. As a result, our non-QM volume is increasing with originators looking for alternative solutions to get their deals closed. After all, this is what we do – helping borrowers left outside of Fannie Mae and Freddie Mac and giving them another chance. At the moment, the population of borrowers in this situation is increasing.

The bottom line is that our originator partners are telling us that Angel Oak and non-QM is providing them an opportunity in today’s market to capture more purchase volume. Investors see the growth and they feel more confident investing in our non-QM borrowers. There is ample growth ahead of us!

The post Is investor appetite for non-QM changing? appeared first on HousingWire.

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Zillow Case-Shiller Forecast for May: Slowing House Price Growth

The Case-Shiller house price indexes for April were released this week. The “April” report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. Th…



The Case-Shiller house price indexes for April were released this week. The "April" report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed last December (that closed in February)!

Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow Research: April 2022 Case-Shiller Results & Forecast: Putting on the Brakes
With rates continuing their steep ascent and inventory picking up in months since, April is likely the first month of this deceleration as buyers balked at the cost of purchasing a home and pulled out of the market, leading to slower price growth. While inventory is improving, there is still plenty of room to go before it reaches its pre-pandemic trend. Still, coupled with relatively strong demand, that will continue to be a driver for sustained high prices even as sales volume is dropping in response to affordability constraints. As a result, more buyers will take a step to the sidelines in the coming months, which will help inventory to recover and price growth to slow from its peak, leading the market back to a more balanced stable state in the long run and providing more future opportunities for homeownership for those priced out today.

Annual home price growth as reported by Case-Shiller are expected to slow in all three indices. Monthly appreciation in May is expected to decelerate from April in both city indices, and hold in the national index. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 26.
emphasis added
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be 19.5% in May. This is slightly slower than in February, March and April, but still very strong YoY growth.

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Spread & Containment

Visualizing A Decade Of Population Growth And Decline In US Counties

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population…



Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population changes.

If an area sees a high number of migrants, along with a strong birth rate and low death rate, then its population is bound to increase over time. On the flip side, as Visual Capitalists Nick Routley details below, if more people are leaving the area than coming in, and the region’s birth rate is low, then its population will likely decline.

Which areas in the United States are seeing the most growth, and which places are seeing their populations dwindle?

This map, using data from the U.S. Census Bureau, shows a decade of population movement across U.S. counties, painting a detailed picture of U.S. population growth between 2010 and 2020.

Counties With The Biggest Population Growth from 2010-2020

To calculate population estimates for each county, the U.S. Census Bureau does the following calculations:

      A county’s base population → plus births → minus deaths → plus migration = new population estimate

From 2010 to 2020, Maricopa County in Arizona saw the highest increase in its population estimate. Over a decade, the county gained 753,898 residents. Below are the counties that saw the biggest increases in population:

Phoenix and surrounding areas grew faster than any other major city in the country. The region’s sunny climate and amenities are popular with retirees, but another draw is housing affordability. Families from more expensive markets—California in particular—are moving to the city in droves. This is a trend that spilled over into the pandemic era as more people moved into remote and hybrid work situations.

Texas counties saw a lot of growth as well, with five of the top 10 gainers located in the state of Texas. A big draw for Texas is its relatively affordable housing market. In 2021, average home prices in the state stood at $172,500$53,310 below the national average.

Counties With The Biggest Population Drops from 2010-2020

On the opposite end of the spectrum, here’s a look at the top 10 counties that saw the biggest declines in their populations over the decade:

The largest drops happened in counties along the Great Lakes, including Cook County (which includes the city of Chicago) and Wayne County (which includes the city of Detroit).

For many of these counties, particularly those in America’s “Rust Belt”, population drops over this period were a continuation of decades-long trends. Wayne County is an extreme example of this trend. From 1970 to 2020, the area lost one-third of its population.

U.S. Population Growth in Percentage Terms (2010-2020)

While the map above is great at showing where the greatest number of Americans migrated, it downplays big changes in counties with smaller populations.

For example, McKenzie County in North Dakota, with a 2020 population of just 15,242, was the fastest-growing U.S. county over the past decade. The county’s 138% increase was driven primarily by the Bakken oil boom in the area. High-growth counties in Texas also grew as new sources of energy were extracted in rural areas.

The nation’s counties are evenly divided between population increase and decline, and clear patterns emerge.

Pandemic Population Changes

More recent population changes reflect longer-term trends. During the COVID-19 pandemic, many of the counties that saw the strongest population increases were located in high-growth states like Florida and Texas.

Below are the 20 counties that grew the most from 2020 to 2021.

Many of these counties are located next to large cities, reflecting a shift to the suburbs and larger living spaces. However, as COVID-19 restrictions ease, and the pandemic housing boom tapers off due to rising interest rates, it remains to be seen whether the suburban shift will continue, or if people begin to migrate back to city centers.

Tyler Durden Sat, 07/02/2022 - 21:00

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Real Estate

Las Vegas Strip’s New Resort Casino Rising in Unique Location

Las Vegas has another major new casino/hotel project underway.



Las Vegas has another major new casino/hotel project underway.

The pandemic somehow led to a major construction boom in Las Vegas. Even though the city shutdown for a brief period where its casinos had to completely close, that did not stop construction in Sin City,

Resorts World Las Vegas opened during the pandemic bringing a major new resort casino the somewhat neglected north end of the Strip. That project has led to a revitalization of that section of the famous 4.2-mile stretch of road. The most notable project might be Fontainebleau Las Vegas, a project that has been on a nearly 20-year odyssey, which appears on track for a late-2023 opening.

That casino will give the north Strip critical mass making it a more attractive area that might be able to compete for tourists with the central and south strip areas dominated by Caesars Entertainment (CZR) - Get Caesars Entertainment Inc. Report and MGM Resorts International (MGM) - Get MGM Resorts International Report.  

The Strip, however, has become some of the most valuable real estate in the world. Any scrap of land available has been selling for outrageous prices, and land that was once thought of as not worth developing has become valuable.

Now, a new major casino project has been announced and it will bring a resort casino to an area on the Strip that surprisingly has never had one.

Image source: Palms Casino

Las Vegas Gets a New Strip Casino

Unlike many major cities, Las Vegas' airport is actually quite close to the Strip. But, while it's just a short ride from the terminal to the heart of Strip, there's not actually a hotel right at the airport.

That's going to change when Dream Las Vegas, a new resort casino planned for the south end of the Las Vegas Strip right near the airport gets built. The project won't be coming from Caesars, MGM, or any other major casino operator. Instead, it's being built by Shopoff Realty Investments, an Irvine, Calif.-based real estate firm, and Contour, a privately-owned commercial real estate investment and development group.

The 19-story hotel will be modest by Las Vegas standards offering 526 rooms and suites along with a casino, a pool, nightlife venue, retail, and 12,000 square feet of meeting and event space, CasinoBeats,com reported.

Dream Las Vegas is expected to open in the third quarter of 2024.  

Why Build an Airport Casino?

An airport hotel and casino is convenient for people looking to come to Las Vegas for a quick meeting. That's really a minor factor given that the heart of the Strip is not a long ride (maybe 20 minutes depending upon traffic) from the airport.

The project met with some security concerns due to its proximity to the airport. 

“After working closely with Clark County Board of County Commissioners, McCarran Airport and the Clark County Department of Comprehensive Planning we are pleased to have been able to secure entitlements for Dream Las Vegas that are mutually beneficial to Clark County as well as our partnership,” said Shopoff Realty CEO William Shopoff, “We believe that this project will be a stellar example for future development on the south end of the Strip.”

The developers tried to make it clear that they're looking to bring something different to the Strip.

“As a Las Vegas native, born and raised, I know first-hand the benefits Dream will bring to the Strip,” Contour CEO David Daneshforooz told CasinoBeats. “Dream Hotel Group will bring the same magic to Las Vegas as they have to their other locations – a curated entertainment destination in a well-designed intimate environment for both locals and visitors to enjoy. This will be a departure from the mega-themed resort concept, ushering in a new era of hotel/casino design for Las Vegas.”

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