Why California brokers are finding more non-QM deals than anywhere else in the country
Mike Pearson (pictured top), SVP of business development at AD Mortgage, said the growth reflects a combination of borrower demographics, insurance conditions, and property economics that have made California unusually well-suited for alternative lending.
“California was already a great non-QM market,” Pearson told Mortgage Professional America. “But then you throw in these additional factors, and it’s just skyrocketing out there.”
Reasons for California surge
The single biggest driver is the concentration of self-employed borrowers, Pearson said. According to US Census Bureau data, California had 1,892,176 self-employed households in 2024, the most of any state, and self-employed borrowers typically have verifiable income and strong credit, but tax returns often obscure some of that income.
“The quickest and easiest one is the number of self-employed borrowers they have,” he said. “Self-employed borrowers have specific tax implications that lend themselves to non-QM. So that’s a big piece of it. The number of self-employed borrowers is not going down, especially in our modern economy.
“There’s more and more self-employed borrowers, more 1099 borrowers. And then the rental market — with rising rates, the increased number of people that are renting is out there. Those are two big areas where, yes, a lot of activity is happening, but there’s still a tremendous amount of upside.”
