5 questions for Altisource's John Vella

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While small in scope compared to the market at large, growth in the non-QM market has proved attractive to the lending industry in recent times. However, through conflation with subprime mortgages, mere mention of non-QM recalls memories to the housing crisis and its catalyst loan type.

To aid its growth in the current state of credit expansion, guidelines for the loan type need clarity, according to John Vella, the chief revenue officer for Altisource, an integrated service provider and marketplace for real estate and mortgages. The same can be said about the next frontier of mortgage technology and data privacy.

Below are excerpts from an exchange with Vella about the near future of non-QM, delinquencies, mortgage technology and data privacy. The questions and responses have been edited for clarity and length.
Where do you see the non-QM market going in the next 12-18 months?

The non-QM market should continue to grow next year. As housing prices continue to rise, a large number of creditworthy borrowers can’t qualify for financing under stringent underwriting requirements. Also, if rates flatten or increase in 2020, this will drive non-QM activity as well as drive lenders to look elsewhere for increased production.

The key to its growth will be demand for takeout financing and securitization. As non-QM volume grows, the appetite for securitization should grow as well. Another factor that could affect the non-QM market is the stock market. If the stock market cools next year, we could see even more investors looking toward non-QM loans.

What is the biggest impediment to the non-QM sector?

The biggest obstacles to the non-QM market are a lack of investors and a lack of clearly defined guidelines for non-QM loans as credit boxes continue to expand.

What loans are most at risk to increased delinquencies?

FHA loans are easily the most at risk since they already have delinquency rates that are three times that of agency loans. Otherwise, jumbo loans that were originated with high-LTV ratios in areas where housing prices are flattening or starting to decline will be at risk of delinquency or default.

We will also continue to see risk among loans in regions that have been impacted by natural disasters as well as loans in areas that are starting to see economic downturns and higher unemployment.

What's the next wave of mortgage technology look like?

The future of mortgage technology lies in integrations between data providers and originators and servicers that bring more granularity and intelligent third-party data. We’re already seeing much more of these types of integrations, which help drive decision-making and pricing as well as improve the customer experience. Many of these integrations will be internal as servicers and originators combine processes to create efficiencies from both a cost and timeline perspective.

How are the new regulations in data privacy (like the CCPA) changing the relationship between servicers and lenders?

This is a big area of risk for both lenders and servicers, and it’s getting bigger. So far, more than a dozen states have data privacy regulations with more expected next year. One of the biggest challenges is that different state regulations are using different terminology. For example, some focus on “personal information” while others focus on “NPI,” which will create additional uncertainty for both lenders and servicers. Ultimately, incorporating these new requirements into a lender’s or servicer’s processes will add technology and training costs.

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Qualified Mortgages Underwriting Delinquencies Mortgage technology Data privacy Mortgage rates forecast Altisource Portfolio Solutions