Lenders are making moves in anticipation of an uptick in non-QM lending. The wildcard is interest rates.

Loan officers continue to benefit from strong refis and purchases, but compensation is coming under pressure. Meanwhile, the need for processors is not abating, according to LBA Ware.

Mortgage production increased by 26% in the second quarter on a sequential basis at the jumbo-focused First Republic Bank. And lock volume declined by 15% at Redwood.

As interest rates declined in 2020, the ARM share of jumbo originations plummeted. Lenders also got more lenient with DTI ratios, while average credit scores and LTV ratios tightened somewhat.

The Ohio-based bank is winding down its direct-to-consumer mortgage lending business, citing falling margins and diminished refinances.

Competition among the two dominant players in the wholesale channel continues to reduce the profit equation. However, margins from retail lending remain robust … for the moment.

An estimated $8.60 billion of non-qualified mortgages and other expanded-credit products were originated in the first quarter. But the sector’s market share was still below 1.0%. (Includes data chart.)

Jumbo correspondent lending continued to make its comeback in the first quarter of 2021 after a sharp drop in volume tied to the coronavirus. Trends were mixed among lenders that focus on the retail channel. (Includes data chart.)

Jumbos accounted for 9.2% of total first-lien originations in the first quarter of 2021, a slight improvement from 4Q20, but nowhere close to pre-pandemic levels. (Includes data chart.)

With home prices continuing to increase, jumbo lending — a must menu item for California shops — is now gaining popularity in other states.