How Rate wants to close its ‘massive gap’ in the non-QM space

Top 10 U.S. mortgage lender Rate is investing in the nonqualified mortgage (non-QM) space by launching a new suite of products. It aims to attract borrowers with nontraditional financial profiles, including self-employed individuals, small-business owners, freelancers and real estate investors.

The Chicago-based lender ranked as the eighth-largest in the country, originating $39.6 billion in mortgages in 2024, up 15% year over year, according to Inside Mortgage Finance data.

In the non-QM segment, Rate originated about $2.8 billion in 2024, which was a “massive gap for us,” according to President Shant Banosian.  

“[Non-QMs are] something we are super committed to because we have the widest variety and strongest non-QM product offering in the mortgage space,” Banosian said in an interview with HousingWire. “Our ultimate goal is to double our non-QM business in 2025 and eventually have it become almost 20% of our production here at Rate.” 

Banosian, who is not only the company’s president but also one of its top originators, said that non-QM products made up nearly 10% of his personal production in 2024. He said he was “a little delayed in understanding and deploying the product,” but now that he’s committed, it can be a “game changer.” 

Dubbed Rate Portfolio, the new products are being introduced in a competitive purchase market. Some prospective borrowers — particularly those who fall outside rigid income qualification framework from Fannie Mae and Freddie Mac — need to “make non-contingent offers and move quickly without traditional financing roadblocks,” the company stated. 

One offering is a mortgage for self-employed borrowers with flexible documentation requirements — such as business cash-flow statements or 1099 forms — instead of traditional tax returns. The product requires just one year of income verification. 

Another option allows borrowers to qualify based on assets alone or in combination with income — including retirement accounts, investment portfolios, money market funds or inheritances. Liquidation of assets is not required to determine eligibility. 

A separate investor-focused product allows qualification based on property cash flow without requiring tax returns. Borrowers must meet a minimum debt-service coverage ratio of 1.0. 

Rate is also introducing a “Buy Before You Sell” product, enabling borrowers to make offers without first selling their current home. It removes the need to qualify for two mortgages simultaneously, although appraisal, credit score and minimum equity requirements still apply.

Kate Amor, Rate’s executive vice president and head of enterprise products, said in a statement that these products “unlock common-sense financing options that weren’t previously accessible through traditional lending channels.”

Amor and Banosian are actively promoting the product line through in-person training with loan officers, real estate agents and financial advisers. These products disappeared after the financial crisis of the late 2000s, and many people don’t even know they are available as a viable solution, Banosian said. 

Among loan officers, “the biggest misconception is that these loans are more difficult to originate and take longer,” Banosian said. At Rate, a non-QM loan can be originated in as little as seven days, he added.

“From an affordability standpoint, the pricing was not that much different in a lot of cases, and it’s much cheaper than what was available to them alternatively,” Banosian said.

“In some cases, the product offerings are better than conventional financing terms. In other cases, they’re not as good. It’s all just based on the risk level, between things like credit score, down payment, the way the loans are being underwritten, all the different factors.”

Regarding Rate’s post-origination strategy, Banosian said it varies based on market conditions, investor appetite and balance-sheet strategy. 

“We want to be super competitive on the front end from a pricing standpoint and allow for scalability on the back end with our distribution model,” Banosian said. “Our goal is always to be at the most competitive price and be an industry leader in place. So we’re always looking to have our margins be as competitive as possible.”

As of Friday, Rate had 2,187 sponsored loan officers and 479 active branches, according to the Nationwide Multistate Licensing System (NMLS).