How to stay competitive with specialty mortgage products

How to stay competitive with specialty mortgage products

The mortgage industry is changing rapidly and originators are focused on adapting to a shifting market in order to stay competitive. HousingWire recently spoke with Lee Smith and John Gibson at Flagstar Bank about what originators can do to align their mortgage products and services with the ebb and flow of the housing market and what Flagstar is doing to help clients remain at the top of their game during this turbulent time.

HousingWire: Should originators focus on any specialty mortgage products such as home equity lines of credit or non-QM?

Lee Smith: Definitely. Both HELOCs and non-QM loans are made to order for today’s mortgage market. While rising home prices may have stopped some homeowners from buying, they’ve made it a lot more attractive for owners to stay put. Equity can be used for any number of purposes, including home improvements. The stars have aligned for HELOCs, and originators should seize the opportunity.

The same is true for non-qualified mortgages. Lack of affordability is spawning fresh ways for originators to qualify borrowers. Non-QM products are more expansive. They generally come with flexible guidelines, longer terms, alternative documentation and more forgiveness of credit events—things you wouldn’t see in agency loans but not necessarily risk factors. I can only speak for Flagstar, but our non-QMs are well-fortified with protections for borrowers and originators.

HW: How can originators pivot their business models in a way that aligns with the current changing market conditions?

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John Gibson: Originators coming off the recent boom years of refis now need to look at different products and a different scale. If they want to grow with a new product set, such as non-QM loans, they’ll have to educate themselves and their customers about the loans. The name itself—non-QM—could raise concerns with customers. It’s all about mortgage affordability, and there’s a great opportunity here for originators to help their borrowers understand what non-QMs are and the solutions they can offer today’s borrowers.

The old standards like FHA and VA loans still offer attractive options for first-time homebuyers, but some originators may be a little rusty on them and might need a refresher. Many companies have downsized and find they have to do things themselves that staff previously did. This could take time away from sales and put more pressure on finding ways to automate. 

Also, companies accustomed to working with a warehouse lender need to know if their lender can accommodate all types of loans—not just plain vanilla agency loans. That’s something else to consider. In addition, this may be the time for companies to make the switch from broker-to-banker or vice versa.

HW: Mortgage technology is accelerating quickly and originators are rushing to keep pace. How can they stay competitive with so many tech enhancements?

LS: Our Flagstar MortgageTech Accelerator program is a way we work to stay ahead of the curve. It’s the first and only accelerator in the US that is dedicated to mortgage technology—a Flagstar-sponsored incubator for breakthrough technology in the mortgage space.

The program offers fintech startups direct access to senior members of Flagstar’s mortgage leadership team and works with them on innovative ways to deliver a seamless, frictionless, tech-enabled homebuying experience to our customers. We just successfully wrapped up our third class of graduates and look forward to launching the fourth accelerator program in early 2023.

Additionally, we work continuously to enhance our technology to offer a more streamlined experience for our partners. Almost every tech project is driven by improving the customer experience, eliminating friction points and making the process quicker, more efficient and simpler.

HW: What specialty products does Flagstar offer to help brokers stay ahead of the mortgage market?  

JG: When the market shifted, Flagstar moved quickly to bring onstream products to help our partners offer options and affordability to their customers. Here are some of our most popular products:

  • Advantage Non-QM with flexible guidelines featuring DTI up to 55% and 90% LTV with a minimum credit score of 680. Credit scores can be as low as 600 and loan amounts range from $100,000 to $3 million. Upcoming enhancements include 40-year term and interest-only options, as well as bank statements as income documentation for self-employed borrowers.
  • A standalone HELOC for broker and non-delegated correspondent partners. Features include a minimum credit score of 680, credit lines up to $500,000 and interest-only and principal and interest options.
  • Expanded ARM options, including our jumbo one-time close.
  • Jumbo ARMs with 5/6, 7/6 and 10/6 options, up to $4 million on primary residences.

Flagstar has supported the broker and correspondent communities for 35 years, and we remain committed to them through every change and every evolution of the business. Visit flagstar.com/why to learn more.