Deephaven counts on non-QM to help navigate choppy waters

Besides the high level of investor transactions and the growing appeal of non-QM, changing demographics also boded well for Deephaven, Davis suggested. In describing the scene, he ticked off an impressive array of statistics from memory.

“In the United States, there’s close to 20 million people that are self-employed – a testament to a very entrepreneurial-spirited country that we live in,” he said. “This accounts for close to 30 million-plus businesses In the United States, there are 19.5 million investment properties that account for 49.5 million units. Of those 19.95 investment properties, about 18.5 million are one to four units. So, there’s a large population of real estate investors out there – first-time and professional investors.”

Studying the market carefully, Deephaven quickly catered to the growing segments. “What we did this year to expand on that product, DSCR [debt service coverage ratio], was to offer business purpose lending where the borrower could actually be the LLC, and that’s gained traction,” he said.

Another growth area: “We’ve also gained traction in the second lien space,” Davis said. “I believe there’s close to $29 trillion in capital equity in the United States. Credit card debt is at an all-time high, car loans are at an all-time high and people have to make payments on their student loans now. We’ve had a lot of folks live in homes that are a little older, so they need maintenance and upgrades. Since we’ve rolled out that product, we’ve seen production increase month-over-month and that’s been a successful launch as well. We see that being a bigger piece of the market next year because when you look at the first lien, it doesn’t make sense sometimes to do a cash-out refinance just to get some extra cash to consolidate your debt to improve your cash flow.”

Inner machinations reflect the growing demand, “We’ve built out some tools,” Davis said. “We now offer a blended rate calculator to help our clients understand the benefit of a second lien,” he cited as an example. “We’ve had a successful launch there.”