A suburban neighborhood.

Demand for mortgages has boomed during the pandemic.
So has the number of self-employed people, a group that often has trouble qualifying for a mortgage.
As a result, unconventional mortgages are gaining traction, while other home lending plummets.

The number of Americans who have trouble landing a mortgage is on the rise, and a group of niche lenders are cashing in to help.

Sprout Mortgage, Angel Oak, Carrington, and Athas Capital Group are four of the lenders who promise to help borrowers without a W-2. They offer competitive pricing and say they help those who are on the road to repairing their credit.

Their specialty caters to investors and everyday borrowers who couldn’t qualify for the tight underwriting standards that followed the 2008 housing bust, as well as to the self-employed. Following the subprime-mortgage crisis, they’ve been embraced by some but haven’t played a major role in US housing finance.

Now, with the rest of the mortgage industry shrinking, these lenders are doing better than ever by catering to borrowers who were outcasts of the market because of low credit scores, heavy debt, or their status as nonsalaried workers. These lenders’ loans differ from conventional mortgages, as they aren’t guaranteed by the US government or the finance agencies Fannie Mae and Freddie Mac — which have stricter underwriting guidelines — and they don’t meet the definition of a gold-standard “qualified mortgage” set by the Consumer Financial Protection Bureau.

The pool of borrowers of these “non-QM” loans may be large, with about 8% of mortgage applications denied each year, according to the mortgage publisher HSH. In another study, the personal-finance company NerdWallet found that while lender-processed loans increased 10% in 2020 from 2019, there were roughly 58,000 more denials.

As for the self-employed, Pew Research found last year there were about …read more

Source:: Business Insider


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