Unraveling Non-QM Loan Identification in Public Records: Best Practices for Mortgage Insights

In the ever-evolving landscape of mortgage lending, the identification of non-qualified mortgage (Non-QM) loans within public records has become increasingly vital. Non-QM loans, which fall outside the guidelines set by government-sponsored entities (GSEs) like Fannie Mae and Freddie Mac, require specialized attention for lenders, investors, and industry professionals alike. Understanding and identifying Non-QM loans in public records is challenging, but important for evaluating risk, assessing performance, and making informed decisions.

This article aims to unravel the complexities surrounding Non-QM loan identification in public records while providing best practices for gaining valuable mortgage insights. By delving into the significance of Non-QM loans, the role of public records, and the implementation of effective identification techniques, industry professionals can enhance their understanding and utilization of Non-QM data. Armed with these insights, they can make informed decisions and adapt to the dynamic nature of the mortgage industry.

Understanding Non-QM Loans

Non-qualified mortgage (Non-QM) loans have emerged as a vital alternative to traditional mortgage products, providing financing options for borrowers who don't meet the strict criteria set by government-sponsored entities (GSEs) such as Fannie Mae and Freddie Mac. Understanding the nature and purpose of Non-QM loans is essential for accurately identifying them within public records and gaining valuable mortgage insights.

The purpose of Non-QM loans is to meet the financing needs of a diverse range of borrowers who are otherwise excluded from conventional mortgage options. This includes self-employed individuals with fluctuating income, borrowers with non-traditional income sources (e.g., rental properties or investments), foreign nationals, or those with previous credit challenges. By providing tailored loan products, Non-QM loans fill the gap in the mortgage market, ensuring that a broader segment of borrowers can access homeownership or refinancing opportunities.

Examples of Borrower Profiles that Require Non-QM Loans:

1. Self-Employed Individuals: Non-QM loans are particularly well-suited for self-employed individuals who may have difficulty providing consistent income documentation or meeting strict debt-to-income requirements. These loans consider alternative forms of income verification, such as bank statements or business financials, enabling self-employed borrowers to access mortgage financing.
2. Unique Income Situations: Borrowers with non-traditional income sources, such as freelancers, commissioned salespeople, or those relying on investments or rental income, may struggle to meet the standardized income verification requirements of traditional mortgages. Non-QM loans provide flexibility in evaluating income sources, allowing for a more comprehensive assessment of a borrower's ability to repay.
3. Credit History Challenges: Non-QM loans can accommodate borrowers with credit histories that may not meet the stringent credit score or derogatory credit event requirements of conventional mortgages. This includes individuals who have experienced bankruptcy, foreclosure, or other credit setbacks but have since reestablished their financial stability.
4. Foreign Nationals: Non-QM loans also cater to foreign nationals seeking financing for residential properties in the United States. These loans offer flexible documentation requirements and evaluate alternative credit sources, allowing foreign borrowers to access mortgage options.

By understanding the borrower profiles that necessitate Non-QM loans, industry professionals can better identify the unique characteristics and indicators within public records that signify these loan products. This knowledge forms the foundation for implementing effective identification strategies and extracting valuable insights from public record data related to Non-QM loans.

The Role of Public Records

Public records play a crucial role in the identification and analysis of residential loans. By understanding the significance of public records and the types of data available in them, industry professionals can extract pertinent data and unravel the complexities associated with Non-QM loan identification.

Public records consist of legally recorded documents that provide a comprehensive view of a property's ownership, transaction history, liens, and other relevant information. These records are typically maintained at the county, municipal, or state level, depending on the jurisdiction's practices. Public records serve as an essential resource for mortgage professionals seeking accurate and up-to-date information related to loans secured by real estate.

Public records contain a wealth of mortgage data that can provide valuable insights for mortgage professionals. Within these records, one can find information about property ownership, mortgage transactions, loan amounts, interest rates, lien positions, and foreclosure filings.. Public records also reveal details about loan modifications, refinancing, and any legal actions related to mortgages. By analyzing this mortgage data within public records, professionals can gain an understanding of loan and property characteristics.

The Missing Pieces

While public records serve as a valuable source of information, there are certain important data elements that may not be readily available within these records. Recognizing the limitations of public records can help industry professionals adopt alternative strategies and data sources to enhance their Non-QM loan identification efforts. Here are some key data elements that are typically not included in public records:

1. Borrower Income Details: Public records often lack specific details about a borrower's income, especially for self-employed individuals or those with non-traditional income sources. Non-QM loans cater to borrowers with unique financial circumstances, and their income verification requirements may differ from traditional mortgages.
2. Credit Scores and Credit History: Public records generally do not disclose credit scores or provide a comprehensive credit history of borrowers. While credit-related information may be available in some cases, it is often limited to records related to bankruptcies, foreclosures, or judgments.
3. Debt-to-Income (DTI) Ratios: DTI ratios, which indicate the borrower's ability to manage debt payments in relation to their income, are typically not directly available in public records.
4. Loan Terms and Conditions: Public records may provide some information on loan amounts and lien positions, but they often lack specific details regarding loan terms and conditions for Non-QM loans. Loan terms, such as interest rates, prepayment penalties, or unique features, can significantly impact the risk assessment and performance analysis of Non-QM loans.
5. Borrower Nationality or Immigration Status: Public records generally do not explicitly disclose a borrower's nationality or immigration status. However, for Non-QM loans that cater to foreign nationals or borrowers with unique immigration circumstances, understanding the borrower's nationality or immigration status is crucial.
6. Borrower's Financial Situation: Public records may not provide a comprehensive overview of a borrower's financial situation beyond what is directly related to the mortgage transaction or property. Non-QM loans often consider unique financial circumstances, such as self-employment income, investment income, or complex asset structures.

To overcome the limitations of public records, industry professionals can implement alternative strategies and data sources to enhance Non-QM loan identification. This may include collaborating with loan originators, leveraging proprietary databases or industry platforms, and utilizing technology-driven solutions that integrate multiple data points for a more comprehensive analysis.

The Best Way to Identify Non-QM Loans Today

In the evolving landscape of Non-QM loans, staying ahead requires advanced tools and technologies that can efficiently identify and analyze these unique loan types. One such solution is Modex, a cutting-edge platform that identifies Non-QM loans by leveraging lender beneficiary information found in public records. Here's how Modex stands out as the best way to identify Non-QM loans today:

1. Lender Beneficiary Database: Modex maintains an extensive and constantly updated database of lender beneficiaries associated with mortgages and trust deeds. This database encompasses traditional lenders as well as non-traditional and specialty lenders known for offering Non-QM loans.
2. Advanced Data Analytics: Modex employs advanced data analytics techniques to analyze lender beneficiary information within public records. Modex can identify specific patterns, lending behaviors, and indicators that are common among Non-QM loans. This powerful analysis helps industry professionals identify Non-QM loans more accurately and efficiently.

Lender beneficiary data helps identify Non-QM loans that are done exclusively by Non-QM lenders (IE: Angel Oak Mortgage Solutions, DeepHaven, LoanStream, etc), but for lenders who straddle both Non-QM and QM (IE: NewRez, Plaza Home Mortgage, etc), it can be much more challenging.

Conclusion

In conclusion, unraveling Non-QM loan identification in public records requires a combination of expertise, data analysis, and advanced tools. The best means today is to leverage the lender beneficiary information found in public records to effectively identify Non-QM loans.

Is there an absolute way to identify Non-QM loans in public record data? Nope. Are there ways to identify large swaths of Non-QM production? Yes.

Modex

Modex provides comprehensive data on the mortgage and housing industry including Non-QM. The platform allows clients to filter and save custom filters to identify loan officers, branches, and companies doing Non-QM production (by looking at the Lender Beneficiary).

But is just looking at the Lender Beneficiary to identify Non-QM production enough? No! Our clients demand more of us! The Modex Engineering Team is exploring more than half a dozen different means of identifying Non-QM production by looking at other public and private datasets. Want to know how we plan on identifying more Non-QM production? Reach out! www.modex.com