Further sign of a liquidity crisis in the housing finance market - a system-wide retrenchment in Non-Qualified Mortgage originations with major originators in the segment shutting down production.
Those considering Non-QM loans risky and are saying "good riddance," are missing the forest for the trees as non-banks dominating housing finance rely on interim funding as working capital since they lack access to the permanent capital available to banks.
Together with iBuyers, which have suspended their purchases en masse, these two are the veritable tide pools of the housing finance ecosystem, teaming with innovation, yet most exposed when the tides turn. While it's comforting that the Federal Reserve Board is now deploying an unlimited checkbook towards quantitative easing, the administration's erratic actions and Trump's deep antagonism towards Powell is depriving the market of something just as critical - confidence.
This recalls the book "The Confidence Game" written 25 years ago at the zenith of the independent central banker with the author positing that "central banks are the sole institutions capable of maintaining a global system of checks and balances."
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