8.21.26 Originators Helping Borrowers; NonQMVerifi’s Danny Flucke on Qualification; Pulling Bond Support

Robbie Chrisman Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include how do we get to lower rates? No politician will react without some sort of crisis. And my interview with non-QM verifies Danny Flucke on how lenders can make faster, better supported underwriting decisions without relying on hard-to-obtain CPA letters for non-agency borrowers. Here, take a listen to a little preview. You've said that income isn't the number one non-QM deal killer. The CPA letter friction is. What is CPA letter friction and why is it killing so many non-QM deals? Danny Flucke CPA letter friction that we run into, there's three most common causes. Number one is the CPA just refuses to cooperate with the lender request. They're not giving you the letter, they're not doing the PLs, they just flat out refuse. Then you have these, you know, the national or the regional, the larger tax firms, we call them the preparation tax firms. They're tax service preparation places. That's all they do. Their employees are prohibited from giving verification letters or PLs. And then you have, you know, that's the HR blocks, Jackson Hewitt, you know, things like that, liberty tax. And then you have the self-filers. Anybody can put into Google, hey, how many people self-file their income taxes every year? And it's 60 to 70 million turbo tax, tax layer. They don't even have anyone to call. So, you know, we solve all three of those scenarios. We can step in and support the borrower and the lender. And the the important distinction I want to make here is that 21 and a half of the top 25 lenders, we already are approved with in support. And it's a it's interesting when I say 21 and a half, people are like, what the hell is the half? Well, we have one lender that loves our verification letters, but because of their underwriting guidelines, we can't support their borrowers that need PLs. Robbie Chrisman You've trained a lot of brokers and loan officers in non-QM pipeline generation. Are there any easy hacks or oops they should be aware of? Danny Flucke The biggest oops that we run into is we're approved with 21 and a half of the top 25 non-QM lenders. And the reason why uh people always question me about that half is because we actually have an investor, a non-QM investor out there in the top 10. And they love our verification letters, but because of their underwriting guidelines, we cannot support their brokers with PL solutions. So I consider them a half. All right. So what happens is the the LO will go into Optimal Blue and they'll price out a scenario and they'll quote that to the borrower. Well, it turns out that the cheapest rate, they will only take verifications from the agent who actually filed the taxes. So if the CPA refuses, now you have that risk of, you know, it seems like bait and switch. You quoted this rate, and now you tell the customer, oh, your CPA won't cooperate. So it's gonna be a half a point higher or a quarter point higher in rate or a half a point in fee. So you have to be cognizant, you have to have that conversation with the customer. Can you get these verifications? We're gonna need these. And if they don't know or they have to reach out to their CPA, again, that's another risk that we talked about. Deal, I've lost millions in production from CPAs steering people to their preferred loan guy or preferred loan person. You know, you have to be cognizant of what the tax preparation requirements are by a specific lender and contact the AE and just say, hey, will you take a CTEC, uh, which is what we are, or CTEC-certified IRS, you know, representative's tell me that they are counseling potential borrowers. Robbie Chrisman Quote, if you're in the market for a home, focus on the things you can control. Save for your down payment, which can be less than 20%, but the more you can put down, the less you have to borrow and to lower your monthly payments. Consider your priorities. Can you live further from the city and save a little money? Do you need a fourth bedroom, or will three do for now? Understand clearly your wants and needs and be ready for compromise. Shop around for your mortgage. Don't just go to your primary bank or get a loan from the credit union. Your real estate agent recommends. Do the legwork to search for the best mortgage rate you can qualify for. Lower rates aren't going to fix everything, but it never hurts to get one as low as possible. End quote. The Treasury's decision to expand long-end buybacks triggered a sharp but short-lived rally with investors reluctant to chase the move because buybacks cannot address the true problem. The federal government's enormous deficit and growing borrowing needs. The fading rally and renewed rise in 30-year yields suggests investors increasingly view buybacks as a short-term fix rather than a solution to the structural problem of $40 trillion in federal debt and rising government borrowing costs that are increasingly spilling into the broader economy. While the headline $40 trillion national debt is eye-catching, the more meaningful measure is the roughly $32.3 trillion held by the public, which is about 100% of GDP and therefore less concerning than the underlying fiscal trajectory, namely a deficit running near six percent of GDP that continues to push the debt burden higher. That fiscal pressure is being reinforced by a weaker dollar and surging oil prices, both of which raise the risk of renewed inflation and further bear steepening of the yield curve. With July's benign inflation and softer spending data not yet signaling a meaningful downturn, the market appears likely to remain focused on deficits, treasury supply, and reflation risks through the end of August, leaving the long end susceptible to another move higher in yields even after the Treasury's intervention. The intervention may actually shift the composition of issuance rather than reduce the fundamental supply of debt, leaving the long end of the yield curve vulnerable as investors increasingly focus on fiscal sustainability. For today's interview, I wanted to welcome to the show Non-QM Verify's Danny Flucke to talk about how lenders can make faster, better supported underwriting decisions without relying on hard-to-obtain CPA letters for non-agency borrowers. Non-QM Verify delivers when tax firms cause friction by refusing to cooperate, a pattern consistently reflected in verified five-star reviews from AEs, brokers, LOs, processors, and borrowers nationwide. All verification letters and PLs delivered used lender-specific templates to instill confidence and ensuring underwriting and compliance standards. Last time we spoke, we were focused on US tax certs, but now we have non-QM verify powered by US tax certs. You obviously spent years in non-QM lending. You're at Carrington, you're at Angel Oak, you're at Kind, among others. What did you learn about scaling non-QM production and working with self-employed borrowers? And I will add to that, at most of the conferences I've been to lately, non-agency production is all the rage. Whether it's how do we tap into this growing borrower base, how do we get with investors? Because there's certainly investor demand for this good yield and good performing loans. It's just proliferating. And so you're at the forefront of this. I'd love to hear what you've learned about scaling non-QM production. Danny Flucke Robbie, great question. So when and a similar question was asked. I was on the panel at the IMN event in Dana Point. And a similar question was asked. And biggest lessons you take away from scaling is on the, you know, whether it's production or operations, when you're looking at thousands of scenarios, you have things that keep popping up. That's what causes the bottlenecks or causes the deals to stall. And the recurring theme during my time in non-QM, before that Alta, was you can't get good solid files verified. And there's different reasons for that, but it encompasses that CPA friction, which causes those pipelines and those files to just stall out. Robbie Chrisman Any patterns you can share among loans that stall? And maybe it's operationally, is kind of the focus here. Danny Flucke This is not a processing issue. It's not an underwriting issue, other than the fact that it it kills pull-through and it causes them to chase down someone for a letter they should easily be getting. You know, it can take weeks for a CPA to give us the letter, and then all of a sudden there's that CYA paragraph in there, and we can't use the letter anyway. We wasted all that time and effort. So it's more of a validation issue. Non-QM does a great job at rolling out new niche products and taking care of these different aspects of the non-QM lending, servicing that clientele, but they've never addressed the verification stumbling block. And that's why we launched non-QM verify. Robbie Chrisman Yeah, can you talk about the need you identified and kind of your epiphany of figuring out a way to make these CPA letters easier on the borrower and simpler for production? Danny Flucke What happened? I had three events that happened in two days. We had a CPA that had a heart attack and was in a coma. We had a veteran that was in a state where if you're a self-employed sole proprietor, you're not required to have a business license. So she had a great viable business, but filed a Schedule C on her personal tax returns. So she didn't have business tax returns, didn't have a business license, nothing like that. And then the last one is I had a non-QM boot camp that we used to run AEs and brokers and LOs through. And one of the LOs uh had a situation where she did everything right. And at the very end, the CPA pulled the customer and steered it to his golfing buddy, and she lost out on a you know $850,000 loan and just crushed her. And my wife said, Well, why are you taking this so personal? I didn't sleep for two days. That's when the eepiphany hit. The light bulb went off. And I said, you know what? We have to make this easier on the borrowers and the lenders. So that began an almost two-year process of the legal red tape and the IRS certifications and the, you know, setting up the different states and LLCs and DBAs so that we could cover nationwide. And uh that's how we launched non-QM verify. Robbie Chrisman It's not a non-QM underwriting company. The lender's underwriter still retains that responsibility. You're validating the self-employment and business information that supports the underwriting decision. Yes. Danny Flucke Exactly. So again, we're not you said it correctly. So we're not an underwriting machine. We're a validation source that's part of the infrastructure that allows the lender to make a decision, yes or no. And um, you know, along those lines, uh, you know, we have about a five to six percent refund rate. Not everybody, you know, we're not here to just rubber stamp files. Um, you know, we do our due diligence. Uh, we actually deliver an evidence report along with that verification letter. And that's a very important distinction because that verification report, that evidence file is what's required by our insurer because we back every file we touch has a $2 million attestation policy on it. So all the stakeholders are protected. It's not just for our liability. That covers the loan officer, the AE, the processor, the underwriter, anybody that might be impacted by an adverse action, they're covered on every file that we touch. So that that evidence file is used by the underwriters to make their decision. So you're correct. The lender has ultimate approval authority. We don't cross into their lane. We just give them the data and the reports, and then they make their own decision. Robbie Chrisman There's still loans out there that get refunded because the verification can't be completed. Well, I mean, what are the trends there? What do you see among those loans that can't be verified? Danny Flucke It's not common. It's five to six percent, and that's a pretty consistent percentage, you know, month over month, quarter over quarter, year over year. So the most common reasons for that are simply that you know they're operating kind of in that fringe. When we get a situation where we get a 1003 from a borrower and it says sole proprietor, and there's no information, we'll we'll send them an intake form and go, hey, we need some more information on your business so we can do the verifications. If we can't verify, you know, it's Joe's RV detailing and we can't verify it anywhere, then what we'll do is we'll send the borrower a list of like 10 different items and we'll say, hey, we need we need three of these items off this list and you know, to process your verification. And if for some reason you can't um, you know, we're gonna process a 100% refund, issue a hundred percent refund, and hopefully we can help you down the road. But it's actually interesting because we have a review from an AE that says, I don't think he knew that it was going on Google. I thought he thought it was like an internal review because he says, he goes, Hey, you guys are like our first line of fraud defense, which was I took that as a huge compliment. That's the backbone of this whole thing is that we're helping the lenders not only get deals done, not only generate volume and increase pull through, but also mitigating that risk. Robbie Chrisman Where do you see non-QM verify and your self-employment business validation platform in the future of non-QM lending as the space continues to evolve? Danny Flucke Non-QM is not going away. There's always going to be the self-employed borrowers. There's always going to be those files that need the validations, that need the verifications, uh, that can't be satisfied with what's already out there. So that's why we built non-QM Verify. Our vision and kind of our mission statement is you know, agency lending, you know, they have their automated verification platforms. And that's what we built in non-QM Verify for the non-QM market. We're already in the LOS of many lenders that are out there. And when they need a verification letter, it's as easy as ordering an appraisal. They just click the drop-down box and boom, the order goes out. Customer gets a link, same as the appraisal process. Customer gets a link to pay, we get the order, we contact the processor to get the information we need. And 48, 72 hours later, you know, they have their verification. Robbie Chrisman Ultimately, it sounds like you're making it as easy as possible for borrowers and lenders to move forward with non-QM files, which is great. For people interested in more information, next steps, what are what are uh best places to find you? Danny Flucke And they can always go to our website, nonqmverify.com, but we've also set up a LinkedIn group that's called Non-QM Brief. And that's for you know operations production, whether it's retail or wholesale. There's great scenario sharing there. Um, people post updates for their products. People will post a scenario and they'll say, hey, you help me find a home for this deal or that deal, or uh, you know, an AE will post, hey, we just solved this, you know, this issue for you know this broker with this borrower and give the scenario. So it's a great synergy. And and what we'd like to offer is anybody that that's interested and is operating in that non-QM space, go to non-QM Brief, find the group on LinkedIn, find the link to this interview, and then post, you know, we love Chrisman or something like that. And we'll send you that evidence file that you know, the packet that we deliver, we have a sample package, so you can share it with your underwriters or you can share it with other production people and see what we actually deliver. And then there's a first time kind of welcome bonus. I'm not going to give it away, but it's a pretty substantial savings on your first order to get us, you know, get you to try this out. Robbie Chrisman Good stuff. Danny, I really appreciate the time. Wish you the best of luck and hopefully we'll do this again soon. Danny Flucke Absolutely. Robbie Chrisman Luminate Bank announced today that it has acquired select assets from first state mortgage services. Many members of the first state mortgage team will join Luminate Bank. The transaction represents a significant expansion of Luminate Bank's presence across the Midwest and the central United States. Licensed in all 50 states, Luminate Bank is recognized as one of the country's top 25 mortgage lenders, reflecting the trust customers and communities' place in the company. This week closes with an incredibly light economic calendar. The only releases of note being Flash S&P Global U.S. Manufacturing PMI and Flash S&P Global US Services PMI, both due out later this morning. We begin Friday with agency MBS prices, a little change from Thursday's close, the two-year yielding 4.18, and the 10-year yielding 4.68 after closing yesterday at 4.70%. Let's wrap up with a joke and some housekeeping. What if you were playing in the club championship tournament? A golf joke, and the match was halved at the end of 17 holes. You had the honor and hit your ball modest 250 yards to the middle of the fairway, leaving a simple six-iron to the pin. Your opponent then hits his ball, often it deep into the woods to the right of the fairway. Just before the permitted five-minute search period ends, your opponent says, Go ahead and hit your second shot. And if I don't find it in time, I'll concede the match. You hit your ball landing on the green, stopping about 10 feet from the pin. At about the time your ball comes to rest, you hear your opponent exclaim from deep in the woods, I found it. The second sound you hear is a click, the sound of a club striking the ball, and the ball comes sailing out of the woods and lands on the green, stopping no more than six inches from the hole. Now here is the ethical dilemma. Do you pull the cheating jerk's ball out of your pocket and confront him with it, or do you keep your mouth shut? Thanks to JazzX for sponsoring this week's podcast. JazzX is a new operating model that helps you scale growth, boost productivity, and transform how your team performs as the first true end to end AI platform built for mortgage.