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Private Lending Market Growth in 2022 and Beyond

If you are a private lender, or you are considering becoming one, it is essential to stay up to date on industry trends.  Doing so will allow you to better serve your clients and take advantage of opportunities as they arise.  As the private lending market continues to grow, it will become increasingly important for lenders to differentiate themselves from competitors.  This can be achieved through a number of means, including offering competitive rates, providing innovative products and services, and building strong relationships with borrowers.  

 

2022 Private Lending Snapshot:  

 

  • Borrowers seeking access to leverage, fixed terms, and execution without syndication will continue to seek out private lenders in 2022 and beyond. 

 

  • Deal sizes will likely continue to increase.  

 

  • Heightened competition in private markets necessitates a nimble approach in an era of high inflation, lackluster stock performance, and energy shocks. 

 

  • The market for non-QM loans has almost doubled since 2020, and continues to increase. 

          What Is A Non-QM Loan? 

 

A non-QM loan (short for “non-qualifying mortgage”) is a mortgage loan that does not meet the standards of a traditional qualified mortgage.  The main difference between a non-QM loan and a qualified mortgage is the evaluation of a borrower’s ability to repay the loan.  A qualified mortgage must be backed by documentation demonstrating the borrower’s ability to repay the loan, while a non-QM loan does not have this requirement.  Instead, non-QM loans allow for flexible income documentation, relaxed credit requirements, and alternative eligibility factors for borrowers who do not meet the eligibility standards of a traditional qualified mortgage.  

 

There are a few other differences between these two types of loans.  Because non-QM loans are riskier for lenders, they tend to have higher interest rates and fees than qualified mortgages, which helps lenders to offset some of that risk.  Non-QM loans can also have adjustable interest rates, balloon payments, and other features that make them riskier for borrowers as well.   

Despite these risks, non-QM loans may be a good option for borrowers who are not eligible for a qualified mortgage with a conventional lender, and for private lenders who employ portfolio risk management tools like AXY Wrapto remove default risk.  

 

Is Private Lending Still Growing In 2022? 


Despite the fact that we’ve seen tremendous market volatility over the past few years, influenced by lingering COVID-19 effects, energy shocks, and war in Europe, the direct lending market has already reached pre-pandemic levels; and it looks like the industry is poised not only recover from pandemic lows, but to reach new heights in 2022.  


Private capital offers more leverage to borrowers with the right credit profile, and also gives borrowers access to fixed terms — an attractive proposition in an era of significant volatility.  While no one can predict the future, with looming rate hikes, inflation, and other major changes on the horizon for the American economy, it is probably safe to say that private lending will continue to see significant growth this year. 

 

How Can Private Lenders Safely Enter New Markets While Remaining Competitive? 

 

As a lender, it’s hard to focus on the big picture and moving your business forward when default risk and actual defaults are negatively impacting your loan portfolio.  Safely entering new markets is challenging at the best of times, and you need a clear head to stake your claim on new territory.   


It’s important to understand that even the best of us need some help from time to time, and leveraging the right solution at the right time could mean the difference between success or failure in a given market.  Removing default risk allows lenders to focus on what really matters – maintaining current relationships, developing new relationships, innovating, and growing. 

 

AXY Wrap™ by Axylyum has the potential to revolutionize how lenders deal with defaulted loans, allowing lenders to make greater strides in 2022, 2023, and beyond.  Learn how AXY Wrapcan shift the risk of default off of your books, giving you the ability to maneuver and conquer new markets, and turn your 2022 private lending portfolio outlook from good to great. 

 

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