Non-QM leader on how to prepare for the worst and the next peak

President talks about what lies ahead for the industry

Non-QM leader on how to prepare for the worst and the next peak

“You hope for the best and prepare for the worst,” said Robert Senko. “I don’t think a lot of companies do that.”

Senko, a non-QM expert and president of ACC Mortgage, was pertaining to lenders that failed during housing downturns. Due to a lack of preparation or sometimes even “ego-driven” leadership, not anticipating the worst-case scenario has led many companies down a path of uncertainty and expensive mistakes.

However, Senko noted that there are other forces at work that make the near term very challenging.

“First, the cost of borrowing has increased, so the purchasing power for the consumer has been reduced,” he told Mortgage Professional America in an exclusive interview. “That means home prices must come down in order for borrowers to be qualified to buy the home.

“The stock market has taken a hit, so folks can’t just sell stocks to afford the home. Double whammy for the market. On a capital market basis, the folks who buy our paper are not willing to pay a premium until the Fed stops raising rates. The Fed has been very clear that they are raising rates to 4.5%, and then they will be ‘neutral,’ meaning they do not plan to raise or cut rates.”

At that point, Senko predicted, “the market will be able to price our paper appropriately, and firms should be able to make normal income on a per-loan basis. Inflation should be greatly reduced from [current] levels, and if the job market doesn’t get hurt too bad, consumers will be able to buy homes at a reduced price in a higher rate environment. Barring any black swan event, assuming Congress becomes split, then the world and economy should operate on a normal basis.”

Having overcome several downturns, Senko is confident mortgage industry players will survive the tumultuous conditions – but with the right preparation.

“Although I operate from a very cautious perspective, fundamentally, I am an optimist as well as a realist,” Senko said. “You have peaks and valleys, and [we are] coming off an incredible peak. Right now, we are going into a valley, but the optimist in me always believes I can improve during the downtime to prepare for the next peak.”

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