LoanScorecard – and Ben Wu, its executive director of technology – brought the market the first automated QM assessment tool. Now, Wu is seeing growth in the Non-QM area and he expects that growth continue for the foreseeable future. It’s probably one of the only areas improving in the current mortgage market, he surmised, and is an area his company is poised to service.
Wu spoke with Mortgage Media’s Dave Matthews at the MBA’s National Secondary Market Conference and Expo about LoanScorecard and the changing market. Both observed considerable buzz at the conference about the non-QM space.
“I think the interest in Non-QM really is picking up, so we’re glad to see that,” Wu said. “And, at this point, it’s about how do we bring that to scale. How do we bring that to bear more broadly across different components in the supply chain?”
Wu said LoanScorecard’s flagship product, its portfolio integrator, is seeing a lot of interest from both originators (as a tool to help loan officers place borrowers into Non-QM programs) and buyers (to ensure the loans being put into the pool are consistent).
The underwriting engine analyzes primarily the loan application, compliance with Rule 10f-3 and the borrower’s credit report. Although going forward, Wu said, there’s interest in directly sourcing additional borrower information, such as bank statements, to ascertain income information. The company is open to other data sources, he said. Digitally, as much as possible: “So definitely it’s always directly sourcing from the provider of that data whenever possible.”
Could a blockchain type of process come into play? Possibly, Wu said. “I think it just depends on what application. So, our job is to source that data and then analyze that data in how it figures into that underwriting decision and applying a lender’s particular guideline.”
Like everyone else in the industry, Wu has his eyes on what’s happening with the GSE’s as policymakers ponder whether and in what way they should be removed from conservatorship. Wu isn’t necessarily speculating about how that’s going to shake out, but he’s looking at what his company might be able to offer.
“I think it’s in flux. And there will always be a market for the borrowers that Fannie and Freddie are currently serving. There’s a lot of talk of the return of private capital and enabling that,” he said, noting there’s “a lot of appetite” in the capital markets to invest there — and “we’re really hoping to make that happen by providing technology and automation.”
Wu expects to see more non-conforming loan products with non-standard features -well underwritten, but not conventional. He said LoanScorecard’s tech is able to handle it.
“Really, our technology is geared toward whatever the loan program guidelines are of the customers that we serve, so enables them to roll out their own branded, customized, automated underwriting engine essentially, that is push-button accessible to their originators – whether those are in-house retail loan officers or third-party originators – to really represent what is fair within the current underwriting guidelines,” he said.
That’s just smart business.
“It behooves you to make sure that across the board, across all the originators, across all the origination channels, that they should have equal access, equal awareness to these various products,” Wu said. “And then working with any given particular loan officer, that they know when a borrower does not qualify for traditional agency lending. What those alternatives are to make sure that they bring that full arsenal of different options to the table, so that every borrower is properly served.”
The company’s tech is available directly within Ellie Mae and, of course, LoanScorecard parent Calyx Software and is made available as an application programming interface (API) so anyone can embed it seamlessly within their own portals and processes, he said.
By and large, this is used in-house rather than directly by consumers. Consumers are still looking for and in need of loan officer feedback and human interaction, even if they want to do the initial data collection themselves, Wu and Matthews noted – so the combination of a knowledgeable loan officer and tech that can give quick feedback (for instance, a rate quote, and/or instant pre-qualification) is a powerful one.
“I think it’s about high tech and high touch,” Wu said. “It’s providing that consumer who might be coming to you that night browsing for mortgage products, giving them immediate feedback. And then pairing that with that high touch from a loan officer that’s going to call them and answer the question.”