“Brokers have to keep the lights on”

To convince the doubters, A&D Mortgage had been staging investor conferences to educate bond buyers.

“We are trying to get together with all the market players in the space, working as a team to show investors the difference; to show them how non-QM loans behaved during the pandemic, and to compare non-QM with conforming loans and to what was happening pre-2008 to tell this story,” he revealed.

“Let me give you just one difference, which is the most significant,” he said, driving the point that non-QM was the polar opposite of subprime. “Before 2008, it was 100% LTV, and no income verification. Today, our securitizations are 70% LTV with full documentation. It’s a completely different ballgame.”

He casually shrugged off concerns about the possible effects of high rates and margin compression on the housing sector (“higher rates are better for non-QM”), while pointing out that homeowners were currently sitting on record levels of equity (according to research by Black Knight, published last month, the average mortgage holder currently has about $185,000 in home equity).

“The fact that there was a lot of money dumped into the economy means purchases will be staying strong for a long time. If you don’t qualify for a conventional loan for self-employed borrowers, you’ll look elsewhere to see how you can qualify using other methods, like bank statements. So we are very optimistic about our business.”