What does the term "non-QM loan" refer to?

What does the term "non-QM loan" refer to?

• A. A loan that meets all regulatory requirements
• B. A mortgage that does not meet qualified mortgage standards
• C. A government-backed mortgage
• D. A high-risk mortgage product

Answer: (B)

The term "non-QM loan" specifically refers to a mortgage that does not meet the criteria established for qualified mortgages (QM). Qualified mortgages are designed to protect consumers by ensuring that lenders adhere to specific underwriting standards and that borrowers have the ability to repay the loan. These standards include factors like limits on fees and points, prohibitions on certain loan features such as interest-only periods, and documentation requirements for borrower finances. In contrast, non-QM loans offer lenders more flexibility in their underwriting standards. This can accommodate borrowers who may not qualify under the strict QM guidelines, such as self-employed individuals or those with unique financial situations. While non-QM loans can fill important gaps in the lending market, they can also carry more risk for lenders and borrowers alike due to the lack of regulatory protections associated with qualified mortgages.

The term "non-QM loan" specifically refers to a mortgage that does not meet the criteria established for qualified mortgages (QM). Qualified mortgages are designed to protect consumers by ensuring that lenders adhere to specific underwriting standards and that borrowers have the ability to repay the loan. These standards include factors like limits on fees and points, prohibitions on certain loan features such as interest-only periods, and documentation requirements for borrower finances.

In contrast, non-QM loans offer lenders more flexibility in their underwriting standards. This can accommodate borrowers who may not qualify under the strict QM guidelines, such as self-employed individuals or those with unique financial situations. While non-QM loans can fill important gaps in the lending market, they can also carry more risk for lenders and borrowers alike due to the lack of regulatory protections associated with qualified mortgages.