NewRez adds temporary rate buydown options for non-QM borrowers

Mortgage lender NewRez added the temporary rate buydown feature to its “Smart Series” non-QM products to leverage the growing group of non-traditional borrowers.

Borrowers of non-QM mortgages now have an option to reduce their rates by 3% in the first year, 2% in the following year and 1% in the third year – called a 3-2-1 rate buydown, the firm said Wednesday. Other options, such as the 2-1, and 1-0 rate buydowns are also available for non-QM mortgage products. 

For a 3-2-1 rate buydown, the seller contributes a lump sum at closing, which is put in the buyer’s escrow account. These funds are then used to cover the buyer’s monthly mortgage payments for three years.

​​NewRez’s Smart Series non-QM products target non-traditional borrowers to help them buy homes at “fair price points through expanded guidelines,” according to its website.

“Many lenders are offering temporary buydowns on government sponsored enterprise/Ginnie Mae loans, but the non-agency homebuyer has fewer options,” Bob Johnson, chief operating officer at NewRez, said in an email. “By adding the buydown feature to our Smart Series, we feel that we’re expanding our ability to help potential buyers and sellers come together.”

Rate buydowns have become an attractive option for homebuyers in a market with soaring mortgage rates and still-high home prices. 

“With the rising rates throughout 2022, and the pace of home sales slowing as a result, many lenders are providing seller concessions to encourage buyers to strike a deal. Buyers are often using that concession to reduce their mortgage payments during the first one to three years through a temporary buydown,” Johnson said.

NewRez’s temporary rate buydown options are also offered for conventional and government loans across the company’s lending channels, including retail, wholesale and correspondent, the firm said. 

Lenders including United Wholesale Mortgage, loanDepot and Rocket Mortgage have rolled out rate buydown features on the heels of high mortgage rates. On Wednesday, UWM expanded its temporary rate buydown to include 3-2-1 rate buydowns from the existing 2-1 and 1-2 buydowns it launched in August.  

In September, Rocket Mortgage launched its “Inflation Buster” program in which the lender reduces homebuyers’ monthly mortgage payment by one full percentage point for 12 months. The goal is to give borrowers a reprieve to combat high inflation and affordability challenges, and Rocket covers the difference in mortgage payments in the first 12 months through a special escrow account. 

NewRez/Caliber is pegged to be the sixth-largest mortgage lender in the country, according to data from Inside Mortgage Finance. (Caliber was acquired by NewRez in a deal closed in August 2021.) Combined, these two lenders originated $56.9 billion in the first nine months of this year, nearly a 60% drop year-over-year.