Many mortgage borrowers who could not qualify for a mortgage before due to the strict lending guidelines on government and conventional loan programs.
Ten years has passed since the housing crisis hit the economy in 2008, and Non-Qualified correspondent mortgages are finally making a comeback. Industry experts are predicting Non-QM loans could grow to $5 billion in 2018, up sharply since 2014 when the market started to recover.
These aren’t the same correspondent Non-QM loans that were partly responsible for the housing crisis. Today’s Non-QM correspondent loans were created in the wake of several regulatory measures designed to make Qualified Mortgages safer to homebuyers and to the investors that purchase mortgages on the secondary market.
After the most recent 2008 housing crisis, President Obama signed the Consumer Protection Act, and the Dodd-Frank Wall Street Reform Act to create minimum standards for mortgages, including the ‘Ability to Repay” rule and a qualified mortgage definition. As of January 10, 2014, these boundaries were adopted by the Consumer Financial Protection Bureau (CFPB) thus, providing banks and mortgage lenders with liability protection when originating QM loans. This allowed banks and mortgage lenders freedom to make more home loans with less fear of buybacks and lawsuits.
Non-QM Correspondent Mortgage Loans
A Non-Qualified Mortgage (Non-QM) is any home loan that doesn’t comply with the Consumer Financial Protection Bureau’s existing rules on Qualified Mortgages (QM). Usually this type of correspondent mortgage loan accommodates people who are not able to prove they are capable of making the mortgage payments. Just because it is a Non-QM correspondent mortgage loan does not necessarily mean high risk or subprime mortgage risk, and in many cases these correspondent mortgage loans require a high FICO score but simply do not check all the boxes associated with a correspondent QM loan. The main difference between the two types of correspondent mortgage loans is that correspondent Non-QM loans for mortgages are protected by the lender against any type of lawsuit should you become unable to afford the mortgage loan. Typically, individuals experiencing one or more of the following may qualify for this alternative: