HomeLight’s Nick Friedman talks about the rise of non-QM lending

HousingWire

On today’s episode, Managing Editor James Kleimann talks with Nick Friedman, president of HomeLight about the rise of non-QM lending, growing demand for buy-downs, and how HomeLight’s “Buy Before You Sell” program is helping buyers navigate a challenging market.   Related to this episode:  ⁠HomeLight⁠  https://www.homelight.com/  ⁠2025 Rising Star: Nick Friedman | HousingWire⁠  https://www.housingwire.com/winner-profile/2025-rising-star-nick-friedman/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.

Transcript

00:00Hey everybody, I'm James Kleiman. I'm the managing editor at HousingWire and I'm here with

00:09Homelight, Nick Friedman. Nice to see you. Nice to see you as well. I wanted to talk a little

00:14bit about this report. So I was in New Jersey. I was in Atlantic City for the New Jersey Regional

00:21MBA and they have White House subs, which if you ever end up in Atlantic City, you have to go. It's

00:26the best value you eat in America. But that as an aside, they talked a lot about this explosion in

00:33non-QM lending that a lot of these, especially with the brokers, a lot of people are moving in

00:38because the credit box is relatively narrow for conventional conforming mortgages and affordability

00:44is a big freaking problem and probably will be for the foreseeable future. I know you guys just came

00:48out with a report. You've been looking at all the numbers, sales, concessions, all this. Could you

00:54maybe, am I wrong? Like is non-QM having a moment right now? You're totally right. I think 75% of

01:00loan officers say that non-QM is the most commonly requested mortgage type right now, which is kind

01:04of crazy. That's insane. Yeah, it's weird, right? It's like you would never expect that three or four

01:08years ago. I think the problem is that loan officers are finding it difficult to adopt these

01:13non-QM products, right? If you do an underwrite on a non-QM loan, sometimes it takes six days just to

01:18get the underwrite back and it's very complicated. There's a lot of different guidelines, et cetera,

01:22right? So I think it's really difficult for a lot of people to kind of adapt to that type of

01:28program right now. And they don't have a scenario desk or the infrastructure, unless you started

01:34doing this a couple of years ago, like a CCM or somebody, right? Yeah. You know, the scenario desk

01:38is Excel spreadsheets right now, right? From all these different letters who just, yeah. And it's just,

01:43and I've seen them and they're kind of impressive, honestly. There's so many formulas and everything,

01:47all these little squares and you type in a couple of things and it's their own little pricing engine or

01:51whatever, but they do it for one non-QM product. And then they're like, oh wow, this took a long

01:55time. I don't want to do it for the other 15 that I have. And they just end up using that one

01:58and that's their core product. Right. And so I think, I think any sort of technology or tools

02:03out there that could help them basically, you know, provide the client with the best possible

02:08solution across any of these products would be really interesting. And when you think about the

02:11demographics, there are so many changes like, and it's not just Uber drivers. It's, there are a lot of

02:16self-employed borrowers out there. There are a lot of entrepreneurs out there who can make use of these

02:20products or a lot of people on OnlyFans, you know, like we should be judgy, right? Like there

02:24are so many people out there who don't neatly fit into the current mortgage market. Yeah. And it's

02:30just a lot of interesting ways to make money. Right. I did like, you know, 20 years ago, a lot of

02:34people just did this standard. I'm going to go to college. I'm going to get a job and I'm going to,

02:37you know, uh, just make money the way that my parents made money. Right. And I think now it's not

02:42like that. Like you talk to people and it's really interesting. Uh, anybody in their twenties are just out of

02:46college, like, um, or even not, not choosing not to go to college. Like those are people who are

02:50sometimes making a ton of money doing things that you would never expect. And those things are not

02:54things that Fannie Mae and Freddie Mac have necessarily accounted for. Right. And probably

02:58won't for something. Probably won't for a long time. Yeah, exactly. Exactly. And it's interesting

03:02because when you do find a way, not that I know a lot of Gen Zers who are able to even come up with

03:07anything close to a down payment, even with DPA, even with what's left of the special purpose

03:13credit programs, if there are any right outside of the private lending space, I feel like you need

03:18some assistance. I know you guys have been checking out some of the numbers behind seller concessions

03:23and all that. Like what are the trends there? What are you seeing? Yeah. So, uh, 44% of purchases

03:29have a seller concession on them right now. Okay. That makes sense to me, which makes sense. And is it

03:32mostly in the markets where we were talking about my, my hometown of Wyckoff, there were six houses for

03:37sale right now, right? There were no seller concessions, right? Because there are going to be 80 offers on

03:42every single house. It's mostly in less competitive situations. Um, and again, you know, I think what's

03:46interesting is most sellers are also buyers and when they're going through the program, the process

03:50today, they realize, Hey, it's really tricky to qualify for, for a home when I'm buying and selling

03:55as well. And so what happens is they're much more willing to give concessions because there's some

03:59empathy there, right? It's like, Hey, I'm having trouble buying my next house. I'm asking for

04:02concessions there. I'll give you some concessions too. It becomes a concession train across the board.

04:06And I think that, uh, people are just a little bit more collaborative today. So there's kind of a nice

04:10thing about, Hey, the sellers and buyers are working together to get these deals done in these

04:14less competitive markets. Now, like you said, in the markets where there's six homes for sale and

04:18there's thousands of buyers trying to get them, you're not going to have that. Right. That maybe

04:21that makes sense for like a final offer product, which is a little bit different, right? You can

04:25kind of have more of a control over the process. Whereas you're not going to have a fighting chance

04:30if you're asking for concessions on a house that has 80 bits, right? Absolutely. Yeah. So talk to me

04:34about some of the other trends that you guys have been checking out. Yeah. The things that are

04:37percolating, things that we hear anecdotally, but I don't know, like, is that true? Yeah. So I think

04:41got the data. I think a really interesting one is, uh, the most common reason that buyers are not

04:46moving through a pipeline for a loan officer, um, is DTI being too high. Um, right. Which makes total

04:52sense. Um, that's probably why we're seeing more people moving over to the outfit chafe. Exactly.

04:56Right. Exactly. And any sort of non-QM product that can help you kind of get there. Bank statement

05:00loans are getting more common. I'm seeing those as well. Um, so that's a really big trend. Um, we see buy

05:04downs being a huge trend right now. Um, I believe it's two ones mostly, two ones are the most common.

05:10Um, I believe 58% of loan officers say that they've seen an increase in buy downs in the

05:14last little bit here, um, in the last, last year. Um, and so I think, uh, again, people are just trying

05:20to find unique solutions to get into the home that they want. Um, I think that the buy down conversation

05:25is always really interesting, um, whether it's worth it for the client or not. Um, I think that

05:29clients get very, uh, just buyers get very rate, uh, sensitive, um, and they don't think about the

05:36payment, right? So they like to go and brag, Hey, I've got a 4% rate. I've got a 5% rate.

05:40Um, but really what's important is, Hey, what are you actually paying your monthly?

05:44It's your monthly. It's always your monthly. And so I think that, um, people get lost in that a

05:48little bit, but the buy down is a great tool to attract the client and say, Hey, I'm a loan officer.

05:53I've got, you know, this client who wants a 4.5, I can give them a 4.5. It's just,

05:57I have to use a mechanism called a buy down and here's how we're going to do it. And,

06:00and people will pay. Right. Um, but I find it interesting that people are going to come up

06:04with 30 grand to do a buy down. Like, why don't you just maybe, maybe that wasn't the best way

06:08to do it. It's not the best. And maybe, maybe you're only going to be in your home for three

06:11years or four years. Right. There's not really that as much of an issue there. Um, and then also

06:15refinancing at some point rates will go below where they are now. And you can keep telling me this.

06:19That's what they say. Yeah. That's what they say. Well, let's talk about all the people who got

06:23those two on by downs in 2022. Yeah. Right. They're probably not feeling so hot right now. You know,

06:27that's, that's expired effectively. Yeah. Right. And I know there are some lenders who are,

06:31we're honoring them and saying, you know, we're, we're going to, to try to make this cost a little

06:35bit more feasible, more feasible for you. Yeah. Are you noticing any geographic trends? You know,

06:41we, we, we know all the new home sales seem to be in, in the South and kind of the Sunbelt area.

06:46Anything else you guys are picking up geographically? Yeah. The only thing we're seeing

06:49is, uh, Florida and Texas are moving very slow right now. There's a lot of saturation in those markets.

06:54Yeah. Um, especially Southern, uh, Southwestern Florida. Um, so on the, on the, um, the Gulf side,

07:01uh, we're seeing a lot of, uh, just really slow moving inventory there. Um, way slower than we've

07:06seen in a long time. Um, and then in the Texas market, it's really just a lot of new builds and

07:10a lot of saturation out there. Um, and in Florida, mostly the insurance issues, I'm guessing is a huge

07:16piece of it. And then just a lot of condos there as well. Right. And so it's like, my dad has been

07:20trying to sell a condo in Florida. We're like, God, I can't even tell you. Oh yeah. No, it's like,

07:23I, everyone I said, talk to you with that condo. Yeah. Yeah. Yeah. Yeah. You're, you're, you'll

07:29have it for a while. Awesome. That's great. We can, we can, yeah, we can go grab a drink in

07:33your Florida condo sometime. I don't want to. It's like, I find like Orlando, like the worst

07:37place. I couldn't, I love it. I love it. Okay. So, so your product, you guys are, you're working on a

07:41lot of personal products. You're working, um, with borrowers, with lenders. Tell me about what you guys

07:48have been up to lately. What, what you're working on right now, what are the problems that you're

07:51trying to solve? Yeah. So the big problem and going back to this DTI issue, right. A lot of people,

07:56uh, come to a loan officer and they say, Hey, you know, I've got perfect credit. I've got,

08:02you know, uh, good income, all this good stuff. Um, but I have a home that I need to sell.

08:07Right. Um, and if I don't sell my home, I can't actually qualify. The loan officer looks at the DTI.

08:12It's too high. They say, Hey, come back to me once you've sold your house. Now, all of a sudden the

08:16loan officer's like, well, I don't know if this person's ever going to come back. Right. Uh,

08:20if they don't sell their house, it could take six months. It could take, you know, if it's a Florida

08:23condo, it could take a really, really long time. Right. Um, so it could take a while to get the

08:27home sold. Um, and so in those scenarios, the loan officer is kind of at a loss for making an immediate

08:33impact with that client. Um, and so what we've done is basically said, how do we allow that client to buy

08:38their next home first immediately right now, remove any sort of liability associated with that

08:43existing property and make sure their DTI is actually doable for the transaction. Right.

08:48Um, and so we built a program called buy before you sell very, very much, uh, what it sounds like.

08:52Right. Um, and we basically place an offer on the client's existing property, uh, which basically

08:57frees up their ability to be a non-contingent buyer. So go in with a really strong offer on the

09:02new home and also allows that loan officer to remove the existing mortgage liability for the client.

09:07So now all of a sudden they can go in and they can buy that next home without counting the

09:10existing mortgage liability. Um, and they can qualify. Right. And you take a point, I guess.

09:15Yes. So, yeah. So our fee is 2.4% for doing this. If, if they're also using a bridge loan. So we

09:22offer bridge loans as well. There's 0% interest, um, and they can just borrow the money to go buy

09:26their next house. So that also accomplishes the problem of, Hey, there's $14 trillion of debt or

09:31whatever. Uh, sorry, $14 trillion of debt. There's that too. There's $14 trillion of equity.

09:35I think between the two of us by now. Yeah. We just borrowed a condo and everything else.

09:38Yeah, exactly. We've got a lot of debt going on, but, uh, 14, $14 trillion of home equity.

09:41Right. And so to tap, I think it's 30, even more. Yeah. Yeah. Yeah. It's quite a bit. And so,

09:48and so if you think about that, right, um, people who are buying your next house, they really don't

09:52want to take it out of their savings. They don't want to liquidate retirement or whatever it is.

09:56They want to just be able to take it out of their house and just move it. Right. And so we allow them

10:00to use the bridge loan as well. The cost for that program is 2.4%. Um, we have another product

10:05called DTI drop. And that's just, if you're not using the bridge loan, if you're just using,

10:09um, the, uh, the mortgage liability removal piece. And so the, the way that you're working

10:14with these end users, are you mostly going through the agent because they're the trusted

10:18kind of confidant or is it the LO? Yeah. So we, we actually go through the loan officer. Um,

10:23and the reason why is we've seen that, you know, it is a financial product, right? Especially when we

10:27have a bridge loan involved, DTI adjustments are all handled by the lender. Right. And so we found that

10:33a lot of loan officers have been selling the product alongside the mortgage. So for example,

10:37if they're doing, you know, a seven, one arm, right, they can say, Hey, we're doing a seven,

10:41one arm by before you sell. And they just, they just loop it together as one thing. And it helps

10:47the client understand, Hey, here's what my, my product actually looks like. Um, and I find that

10:51to be very interesting way for a loan officer to sell the product. Loan officers also love to talk to

10:55agents and clients, obviously. Um, and so what we've relied on is them actually spreading the word,

11:01um, and keeping control of the agent and the client. We don't want to be involved in that.

11:05Uh, we've completely white labeled the program for the loan officers. Um, and so we've partnered

11:09with hundreds of lenders around the country and, you know, it's not our product. It's the fairway

11:14by before you sell program or the cross country by before you sell program. It's not the sense,

11:18you know, home light by before you sell program, at least so that, that way the clients and agents

11:22that are working with the loan officer, um, can get a really customized and tailored experience

11:25from that loan officer. And they don't know who home light is. They don't want another

11:28proper noun that they have to think about or worry about. And we don't want credit for it.

11:32Right. Right. We're in the, we're, we're doing our thing because you're there to support fairway

11:35or CCM or whomever. Right. Exactly. Are you, are you finding, so we we've seen through the MBA

11:40application statistics that these arms are starting to really pick up and that always happens when the

11:45rates spike up. Right. So, so no, no shock there, but I know when I've talked to my parents,

11:50we're not maybe as financially literate as some others. They hear the word arm and they go,

11:54wasn't that that movie with, uh, who's that guy from the office and how do things work out there?

12:00Terrible. The big short. Right. So there's kind of this fear that these are dangerous products that

12:04you shouldn't be messing with them, that there are ninja loans coming through our customers getting

12:09more sophisticated about using the non Fannie Freddie standard mortgage. I think the best LOs are

12:15getting more sophisticated about explaining them. And I think, I think that's, what's really important.

12:19So again, like if I buy a home every six or seven years as a, as a customer, as a client,

12:24like it's very rare that I'm keeping up with things until I'm like thinking about buying again.

12:27Right. That's what most, most people are going to be like. And so if I'm a loan officer in this

12:31environment, um, I always tell, I always recommend just know everything you possibly can about every

12:36other product. That's not the 30 year fixed mortgage. And you're going to stand out like crazy in this

12:41market. Um, I mean, I heard a statistic when I was at the Atlantic city conference at something like

12:47only 30% of LOs even could do non QM. Yeah. How do we start to bridge that gap and get them

12:55more into it? Because it's difficult for a lot of lenders who don't have the infrastructure. It's

13:00like, okay, we could start now. Sure. Yeah. But it's going to take at least six months to get anyone

13:05who knows how to do it. Sure. To build out the competence, to have the lawyers review it. Yeah.

13:09Like where would you start if you're a lender who hasn't set up kind of a non QM focus with these

13:15products? I would, I would just start with the broker channel. I mean, I know that even if you're

13:19a retail lender, just start with the broker. They're mostly doing it anyway. They're mostly

13:21doing it anyway. So why not? Like there's so many brokers, there's, there's specific wholesale

13:25lenders that literally just focus on non QM products and that's what they do. And so if you want to take

13:31it into your business and do it yourself, that's fine at scale, maybe because economics are going to

13:35be better and all of that. But in the short term, just have the product. It'll help you get in the

13:39door with these agents. And I think what's really cool is you're not going to be using them every

13:43single day, right? Like, yes, people are really interested in them. They need them in a lot of

13:47cases, but if you can hook the agent on, Hey, I offer this and that non QM product, I offer bank

13:53statement loans. I offer DSCR, I offer buy before you sell, right? If you offer these types of programs,

13:57you can get in the door with these agents and they will send their normal business to you as well,

14:02their conventional business over time. So I think it's a great way to just stand out in the industry

14:07today. And even forgetting like possibly getting standard vanilla loans out of these or working with

14:13these agents on that. If you, if you are working with an agent who has real estate investor clients,

14:18you might find a guy who's going to do 20 loans with you in a year, right? And then probably some

14:23products too, right? So, so if you don't know how to use them, I think you're probably at a

14:26competitive disadvantage as we start to see these affordability issues really kind of calcify a

14:30hundred percent, right? Nick, thank you so much for joining me. It's been a pleasure.

14:34I really appreciate it. It's been great. All right.

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