“The life of the loan matters and your ability to go back to that borrower and refinance that borrower matters,” he said. “So who you’re doing that loan with matters. Not all non-QM is created equal. Just because we all offer DSCR loans doesn’t mean that we all do them the same way, and it does not mean that we are all going to treat your borrower with the same respect as you would.”
Pearson said he has spoken with brokers who found out too late that their lender had made assumptions about investor guidelines that turned out to be wrong, leaving them with nowhere to turn.
“I’ve literally talked to clients that are desperate and frustrated because they’re almost out of contract,” he said. “They went to a lender that, on paper, black and white, promised certain criteria and found out they didn’t understand and comprehend their investor guidelines. They made assumptions, printed assumptions, collected originations based on assumptions and found out they couldn’t do anything. They couldn’t close the loans. They couldn’t honor the locks.”
The education gap
Pearson said the concentration of lenders who cannot fulfill their promises is partly a product of how quickly the market grew, with volume growth attracting new entrants who understood the product at a surface level but did not have the infrastructure to back it up.
He said part of that gap traces back to how new originators enter the business. Non-QM products are not covered in SAFE licensing courses, which means a broker’s introduction to non-QM depends almost entirely on where they land and who they learn from.
