This week on the Power House podcast, Diego sits down with Tom Davis, the chief sales officer at Deephaven Mortgage. Deephaven has been a pioneer in the non-QM space since its founding in 2012, and Tom joins us today to talk about all things non-QM and 2025 market growth.
Deephaven’s non-QM focus accounted for $70 billion in 2023 and is expected to grow to over $80 billion in 2025. Tom talks about specializing in lending, market opportunities in a high-rate environment, and growing a second-lien product line. He also talks about focusing on investor and realtor relationships to unlock and capitalize on market share opportunities.
Here’s what you’ll learn:
In a high-rate environment, there are still opportunities for growth.
Home equity and second lien products are new key areas for growth.
Building relationships with investors can lead to multiple loan opportunities.
The supply-demand imbalance in housing presents opportunities for growth.
Targeting the top 5% of realtors can yield better results.
There is a significant need for renovation loans in the current market.
Related to this episode:
Non-QM Archives - HousingWire
https://www.housingwire.com/tag/non-qm/
Deephaven Mortgage
https://deephavenmortgage.com/
Tom Davis | LinkedIn
https://www.linkedin.com/in/tom-davis-a0bb846
Enjoy the episode!
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
Deephaven’s non-QM focus accounted for $70 billion in 2023 and is expected to grow to over $80 billion in 2025. Tom talks about specializing in lending, market opportunities in a high-rate environment, and growing a second-lien product line. He also talks about focusing on investor and realtor relationships to unlock and capitalize on market share opportunities.
Here’s what you’ll learn:
In a high-rate environment, there are still opportunities for growth.
Home equity and second lien products are new key areas for growth.
Building relationships with investors can lead to multiple loan opportunities.
The supply-demand imbalance in housing presents opportunities for growth.
Targeting the top 5% of realtors can yield better results.
There is a significant need for renovation loans in the current market.
Related to this episode:
Non-QM Archives - HousingWire
https://www.housingwire.com/tag/non-qm/
Deephaven Mortgage
https://deephavenmortgage.com/
Tom Davis | LinkedIn
https://www.linkedin.com/in/tom-davis-a0bb846
Enjoy the episode!
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00I personally think in every market there's an opportunity, either you take markets or someone
00:05takes yours. Last year was one of the most challenging years, the year before was really
00:09challenging too, but our production was up over 70 percent, over 23 levels, and we had an all-time
00:15record in 2024. Welcome to Powerhouse, where we interview the biggest names in housing
00:29and ask them about their strategy for growth. I'm Diego Sanchez, President of HousingWire.
00:35My guest today is Tom Davis, Chief Sales Officer at Deep Haven Mortgage and a true powerhouse. Tom,
00:42it's so great to have you on the show. Thanks for having me, Diego. Excited to be here.
00:47So for those that don't know you, could you briefly introduce yourself and Deep Haven
00:53Mortgage? Yeah, absolutely. So I'm the Chief Sales Officer here at Deep Haven. I'm responsible for
01:00all the sales initiatives, whether it's wholesale sales and non-delegated and
01:07delegated sales. So I run the sales team, plus the 70 sales folks across the United States,
01:14and also responsible for spearheading marketing initiatives and pushing on that front as well.
01:22I've been in mortgage pretty much right out of college. I've worked at some of the largest banks
01:27and some IMBs and some agency investors, mostly in my career on the B2B side, working with brokers
01:34and mortgage bankers. A little bit about Deep Haven. Deep Haven has been around since 2012,
01:42as Deep Haven is known as a pioneer in the non-kim space. We were one of the first
01:49investors to the market, one of the first securitizers in this space, helped bring
01:55liquidity to this space, introduced products into the market. And so Deep Haven today is one
02:03of the largest non-kim investors in the United States. And we're very bullish about the space
02:11and looking for the space to continue to grow over the next three to five years.
02:16So I think the non-kim space is a high growth market and Deep Haven's position,
02:23well positioned in this environment in 2025.
02:29There are multi-product lenders, and then there are non-kim specialists like Deep Haven.
02:36Why do you think brokers should work with a specialist instead of a multi-product lender?
02:42Yeah, for me, it's like any other profession, whether you're a wealth advisor or you're
02:47an attorney, when you're working with a professional and you want expertise,
02:53you're going to want to work with someone who is the expert in your market. And so for Deep Haven,
03:00we're known for expertise, our knowledge and focus. And so we're really focused on this space
03:06and helping our customers with their strategy, helping them with their LOs get adoption. We do
03:11a lot of training and education because LOs won't feel comfortable selling the product if they're not
03:19educated on it. It's like any other profession. If a broker is working with an investor that
03:25happens to dabble in non-kim, then they're not going to get the expertise, the knowledge,
03:30and the focus and all the best practices that we've been able to aggregate over the last 12
03:38years and share with our partners on just best practices on how to grow their business.
03:43So I would highly recommend that if you're an originator today, that you work with
03:49an investor such as Deep Haven that has the expertise, the knowledge, the focus, the track
03:54record, and has been in the space for a long period of time because you're going to get the
04:02most upside working with an investor who's dialed in and focused in the non-kim space.
04:08You mentioned about 70 account executives, sales professionals on your team. Is that team
04:16broken up by geography or by loan product? How do you break them up?
04:22Yeah, so we have really two sales teams. The wholesale sales team, we have three regions
04:28and an inside team. We have the West Coast region, Central region, and the East Coast region. We have
04:34an inside team and those AEs work those markets and those regions. So for example, I live in
04:41Florida. We have a group of AEs that work the Florida or Southeast market. On the correspondent
04:47side, we do have two regions in East and West Coast and there's four AEs in each region there
04:54and they work their regions like a traditional correspondent investor does. So very tactical,
05:04allows us to build relationships in those markets and each market has a different need.
05:10Like Florida might be experiencing more non-warrantable condo or might be focused
05:18on non-warrantable condo. There might be more investors in certain states. So having AEs
05:24focus on markets allows them to really dial in the product with the client and so that's
05:30the approach we take today. We've kicked off 2025 with rates that haven't done much except
05:38go a little bit higher, actually. I think a lot of folks were expecting a decline in 2025.
05:44Is a higher for even longer rates environment a good environment for a non-QM specialist like
05:51Deephaven? Yeah, I personally think in every market there's an opportunity. Either you take
05:58markets or someone takes yours is what it comes down to, right? Last year was one of the most
06:03challenging years. The year before was really challenging too but our production was up over
06:0770% over 23 levels and we had an all-time record in 2024 and so we're forecasting our growth into
06:152025. So about a 20% to 25% increase over the 24 levels and so we've built a plan. We're maniacally
06:25focused on that plan. We're looking at product expansions and bringing out or introducing
06:32products that we have or through our sister company, Anchor Home Loans, which specializes in
06:39RTL, which is Residential Transition Loans. You got to understand the market and then go after
06:46that business. So for example, new construction last year was 30% of purchase transactions were
06:52new construction. So if you're a loan officer, you should have a construction product. You should
06:57have a construction product that focuses on builders and developers and realtors.
07:0625% to 20% was the range for investor loans. So if you're a loan officer, you should have
07:17a full product offering of investor loans. Not just the agency but having a DSCR option. There's
07:25over 19 million self-employed people in the United States that account for over 30 million businesses.
07:30You have a lot of high net worth, high income borrowers in the United States.
07:36Equity is at an all-time high, over 30 plus trillion. You have credit card debt at 1.6
07:42trillion, auto loans at 1.1 trillion. The average age of a home in the United States is over 40
07:47years. And we have a seller strike with these lower rates. People are not moving out of their
07:51homes. So existing inventory is not coming to the market. You have a supply-demand imbalance
07:56of about 5 to 7 million homes in the United States because we've had this migration and home
08:02builders haven't been able to keep up with the population growth. So understanding all those
08:07trends, right, and focusing on areas such as construction, non-QM, the fix and flip in bridge,
08:17focusing on second lien production. Those are all areas, if you look at just the growth over the last
08:21year, where they've experienced a lot of growth and going into 2025, that's where the growth is
08:28at. Non-QM this year, or last year, finished around 70 billion. We expect that the forecasters
08:34out there and industry experts are calling for an 80 to 100 billion dollar market. Second liens
08:40is really going to take off, I think, in a big way, whether it's HELOC and standalones. Once
08:46again, renovation, people need to renovate their homes because they're not going to be moving out.
08:51More than 50% of second liens are actually renovation loans today. People tapping into
08:57their equity. And the biggest issue is a supply-demand imbalance of housing. There's 5 to 7
09:03million under supply. And if LOs want to be part of the solution and help builders bring inventory
09:09into the market or bring existing properties that are uninhabitable back into the market
09:16through rehab, the folks who offer those products and become market experts and become masters of
09:24the trade of non-QM, residential transition loans, and second liens, they're going to have a leg up
09:32on all the other originators in the market. It's going to allow them to differentiate themselves.
09:36It's going to allow them to tap into the realtors that have these products. We're teaching our
09:44originators, this is where you need to focus. This is where you should be targeting. These are the
09:51referral sources that you need to tap into. Look, the top 5% of realtors in the United States,
09:57the top 5% of realtors control 90% of the listings. We're teaching originators,
10:03if you want to go after the people who are moving weight in real estate and have the highest
10:10listings, you should use these products and become an expert and tap into those because they're the
10:16ones who are moving the properties out there. If they focus on the bottom 95% and only have 10%
10:25of the listings, then that's why they're not driving originations or higher volume levels
10:33because they're focusing on the wrong set of people. They need to focus on the top 5% to have
10:3790% of the listing. We're teaching folks how to use these products to tap into those realtor
10:44relationships and outside of the realtor relationships, all these other referral sources
10:48that you could use that really help you tap into the non-QM borrower.
10:53I love that focus on, hey, I'm going to grab market share even if the market is struggling
10:59overall. Several of your competitors have very publicly struggled over the past few years.
11:06While you said it, Deep Haven seems to be leaning in and grabbing market share.
11:11What do you think is the secret of that success over the past year or so?
11:16I think, obviously, we've been doing it from day one. We have the expertise. We have the focus,
11:23the knowledge. We have the right leadership at the highest levels and within the organization.
11:31This is all we do, so we have to be good at it. I think one thing that really sets us apart is we
11:38probably do more webinars and training and education with our clients than anybody else
11:43in the industry, even outside of non-QM. We probably have about 15 types of webinars for
11:51our clients. A lot of times, we'll present on behalf of our partners to their referral sources.
11:57We'll do white label presentation to realtors, to attorneys, to accountants, CPAs. We take a
12:07really hands-on approach. We teach our clients the products, deep dive in the products, how to
12:12leverage the products, how to source these types of loans. By spending time and educating our
12:20clients and being on their calendar, just like anything else, if you want to be a professional
12:26baseball player, professional golfer, or a highly successful executive, the pros train all the time.
12:36We spend a lot of time with our clients educating and training them. That's one thing we do
12:40as good, if not better, than anybody else in the industry. Then, outside of that, I think just the
12:45way we're structured with our parent being in the resi as a resi asset manager. Our sister company
12:55is a servicer. Then, another sister company is a major residential transition loan or RTO, which
13:04is your fix-and-flip bridge and construction. Everything is done in-house. We're not using
13:10third parties for any of this. Being able to work with our clients and not just offer noncom, but
13:16offer these other products in a seamless fashion, I think, gives us a competitive advantage in the
13:24marketplace. Does that sister company, the servicer, service all of the mortgages that
13:31DeepHaven originates? Not necessarily. The vast majority of the loans that DeepHaven buys
13:37are serviced by our sister company. That's interesting. You mentioned different areas
13:46of opportunity moving forward. One of them is in the home equity area. I noticed that DeepHaven
13:54recently launched a new closed-end second lien product. You introduced your first HELOC product.
14:01Why the push in the home equity? We see it as a huge opportunity. It's super bullish.
14:09If you look at it, rates are going to remain higher for longer. That's the play, right?
14:13Once again, credit card debt's at an all-time high at $1.6 trillion, auto loans at $1.1 trillion.
14:21These higher rates and higher inflation has driven the cost of living higher. People are
14:28going to have to tap into their equity to renovate their homes and also to consolidate debt and
14:34improve cash flow. If you just look over year over year, the growth in the second lien market,
14:42it reminds me of going back five years in the non-GEM space. I just know it's going to grow.
14:51Right? Talking to our clients, there's a ton of need there. We're seeing our production
15:00grow in a material way. It's a sizable part of our budget going into next year. We're all in the
15:07second lien space. We have some enhancements coming out here in the next week or so. Super
15:12excited that are really going to help us become a market leader in that product.
15:19On the close end side, stay tuned for that. The entire sales team is focused on that.
15:26We're spending a lot of time with our clients on their home equity or second lien strategy
15:32going into 2025, what that looks like. Then spending time with them, building out their
15:37strategy and helping them and their loan officers train them so they adopt that product.
15:47With rates where they're at, I don't see refi cash outs coming. It's kind of like a Band-Aid
15:54loan, right? You do this loan and then the next loan, you'll get the next one. If rates do come
15:58down, then you could refi cash out and pay off that second lien, but it just doesn't make economic
16:03sense to refi cash out and take $50,000 out if you have a $500,000 or $400,000 mortgage at 4%
16:12or 3%. It just doesn't make sense. Economically, it doesn't make sense.
16:19Anyways, we're really bullish there. That's going to be an area we're going to really
16:24dial in and focus on in 2025. Once again, we're super bullish about that space.
16:33Any other product area that you're really bullish about as you think about,
16:38how am I going to grab even more market share in 2025?
16:40Yeah. Like I said, investors are 25% to 28%. That's, I think, per CoreLogic.
16:48Some states were as high as 30%. New construction has been 33% of all purchase transactions.
16:56If you look at what happened back in 2020 or 2023 or Q1 with the regional bank failures,
17:05those are regional bank scare, that changed how home builder finance is being done.
17:11Construction financing for these middle tier builders or regional builders, maybe they build
17:17five or 100 homes a year in their region. Financing for those builders has become a little
17:24less liquid or choppy compared to the mega builders. The largest 20 homebuilders in the
17:31United States, they are probably pushing out maybe 30% of the units. The largest homebuilder
17:38in the United States, I think last year, built 66,000 homes. If they increase their output by
17:4910%, that's only like 6,000 homes. You have a 5 to 7 million under supply and we've had this
17:54migration. There's this long term demand there. The big builders could get financing, easy for
18:02them to get street financing. The mid tier guys are the ones who need the financing. As a loan
18:10officer, if you could work with builders, developers in your market and help them get
18:17financing to build a project or let's say the builder's experience and the builder wants to
18:23build 20 homes. Our product will allow that builder to build up to a $10 million project
18:31and they can have multiple $10 million projects. For example, if the builder wants to build a
18:36$500,000 to $100,000 home, they could build 20, 30, $500,000 homes. Now that loan officer's
18:47picking up, they're further upstream. They're working with the builder.
18:52Now, once the builder is getting the construction financing, once that loan home is done,
18:59then either the builder or the developer, real estate investor either sells the property or they
19:05keep the property and they rent it because that's a big play too, is rentals or they do a bridge
19:13loan. There's multiple opportunities. If you go further upstream, now you're going to have
19:23potentially two loans. If they do sell the property, then potentially they could be the
19:30takeout originator for the consumer if the consumer is buying it. When you're working
19:37with investors, I was just in an investor show yesterday. There's another one tomorrow down in
19:43Miami Beach. I would highly recommend all originators today to look at how much investor
19:51transactions they did last year as part of their pipeline. If it's less than 25%, then you're
19:56under indexing the market. I've been on calls with large IMBs and I've asked them what percentage of
20:05your production is investor and they're like, they didn't know. Some didn't know and you get
20:11answers like 8%, 9%. We don't really do that much. They're really under indexing the market.
20:17If you're not at 25%, then I would highly recommend working with the real estate investor
20:25clubs in your market. Get to know the realtors you focus on investors and offer these products.
20:31Because the real estate investors, they don't have one loan a year. They have like 5 to 10,
20:36some of them have 50 loans a year. Versus a consumer, if they buy a house, you might only
20:41get another loan maybe three years or five years down the road. The investor, if you work with an
20:47investor and you have all these products and you're an expert and they trust you and you do a
20:51good job for them, they'll start sending you a lot of business and they hang out with other investors
20:55and they tell their friends, now you're getting 5 to 10 loans from the same investor on an annual
21:00basis. That's how you really grow your production. That's what we've seen. We're
21:06teaching our clients and our partners like, hey, this is where you should be focusing on
21:11and we're guiding them. That's been part of our success. It's an entrepreneurial approach as a
21:20loan officer. Once again, there's opportunity in every market. Either you take it or someone
21:26takes yours. I don't know about you, Diego, but I don't like when anybody takes anything from me.
21:34Agree completely. I love that approach. When the LO starts to get in good with the investor
21:42community in their local area, they can come back to you and back to the education piece.
21:47They can get educated on those products and make sure that they're putting out the best
21:53offering they can. If you think about it too, another place to start educating your partners,
21:58the realtors. Realtors are self-employed. Those are non-chem loans, but how many realtors in
22:03the United States own investment properties? A lot of them. I presented to 2,000 realtors. They're
22:09the top realtors in the United States. A lot of them, the vast majority of the group did not even
22:15know what a non-chem loan was or a DSCR loan. Then we started explaining it and asked the group,
22:21who thinks that they could use this to buy an investment property or cash out to go buy more
22:26investment properties? Everyone put up their hands. We do a lot of investor loans for realtors who
22:34have properties that want to buy more properties. That's another thing. If you don't feel comfortable
22:40investing or presenting in front of realtors on this product, we can present with you. We can do
22:46it in person or we can also do it via webinar. We'll give you our presentation deck. You can put
22:52your name and logo. We're your trainer. They never know it's debayment. They think it's
22:59housing wire mortgage. Tom Davis is Diego's trainer. We do a lot of hands-on approach
23:08when it comes to helping our customers drive their business. Then once I do that presentation
23:14and you have 20-30 realtors, I promise you, you're going to get two or three. They're going
23:18to call you and say, hey, I have a property. I'd like to use this product for my personal property.
23:25Now you're providing a solution to the realtor. You're not calling the realtor like everyone else
23:29in the country saying, I have the best rate. I have great service. I pick up the phone. That's
23:34everyone's pitch. How do you provide value to the realtor and how do you help them put more people
23:39in the homes? That's the approach that we share with our partners and have them start thinking
23:47about that. Tom, I feel like we've unlocked some serious opportunity in market share growth
23:53opportunity in this conversation. What's the best way for somebody to get in touch with you
23:59and learn more about these opportunities? Yeah. You can go to deephavenmortgage.com or you could
24:05reach out to me directly at tdavis, D-A-V-I-S, at deephavenmortgage.com. Or you could connect
24:13with me on LinkedIn as well. I have a non-QM group there and Deep Haven is one of the largest
24:21followed non-QM investors in our space, if not the most followers.
24:25You have some followers yourself? A couple.
24:28Well, Tom, it was so great to catch up with you today. Thank you so much for joining me on
24:35Powerhouse. Thanks, Diego. I appreciate it. Happy New Year and hopefully we can do this again. I
24:40appreciate the time today.