What is Non-QM lending? Is it sub-prime? Is it still the wild west? Contrary to many beliefs, Non-QM loans are not the same as before the great recession. The requirements to qualify are no longer just being able to fog a mirror with breath. They are government regulated and must be able to demonstrate the Ability-To-Repay.

After the financial crash in the late 2000s, the lending sector faced unprecedented reform. Rules which were unwritten before the crash were now inked into law. Minimum standards were raised in determining whether applicants qualified to receive a mortgage and lenders would be held accountable if certain checks and balances were not met: enter the Ability-To-Repay rule (ATR). Lenders were already petrified to lend due to the uncertainty in the market and regulators knew the updated laws would only raise apprehension. Due to this, the Consumer Financial Protection Bureau (CFPB) provided examples of how to satisfy ATR via government-created guidelines; they named these loan-types Qualified Mortgages (QM loans). If a lender qualified a customer using QM guidelines and were subsequently sued for originating a loan when they should not have (based on a customer’s ability to repay), courts are likely to assume the Ability-To-Repay was indeed met and dismiss the suit.