- Unconventional mortgages--once blamed for contributing to the housing meltdown 10 years ago--are making a comeback as lenders look for new borrowers to drive growth, the Wall Street Journal reports.
- The borrowers are typically people who can't get a conventional mortgage because they have a harder time proving income through the usual documentation such as pay stubs or tax forms.
- Though still a tiny part of the overall mortgage market, these unconventional mortgages originations are increasing while conventional home loans are decreasing.
- Lenders originated $34B of unconventional mortgages in the first three quarters of 2018, up 24% Y/Y, according to Inside Mortgage Finance. Overall mortgage originations during that time were $1.3T, down 1.2% Y/Y.
- Today's "nonqualified" mortgages, though, have changed from their pre-crisis predecessors. These new loans comply with "ability-to-repay" rules and underwriting and due diligence are stronger than the pre-crisis era.
- Some regulators, consumer advocates and others still worry that the growth for this type of mortgage and increasing competition to make such loans could lead to higher risks for the housing market.
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Original article