What to consider if you want to break out of the QM box.

Many lenders are tempted currently to limit their originations to loans that meet the Consumer Financial Protection Bureau's qualified mortgage standards, calculating that doing so will reduce their exposure to enforcement actions related to the ability-to-repay rule as well as to litigation from borrowers threatened by foreclosure. But experts suggest that it also severely constrains business opportunities, leaving QM-only lenders with a smaller pool from which to draw originations. They also point out that small margins on GSE lending and vigorous enforcement and litigation from the FHA are further downsides to staying within the qualified mortgage's safe harbor. Plus recent studies from Moody's Investors Service and Andrew Davidson & Co. suggest that the risk and reward of non-QMs isn't dramatically different from that of qualified mortgages, as long as underwriting is strong. Explore the pros and cons of lending beyond the QM limits in IMF's Guide to Non-Qualified Mortgages. In addition to learning why it might make strong business sense to be active in this market, estimated at 10 percent or more of current business, you'll also gain additional information on pricing, secondary market considerations and how to protect your company from ability-to-repay violations. Partial Table of Contents The CFPB's Ability-to-Repay Rule ATR Requirements Verification of Third-Party Records Violation of the ATR Rule Differences Between a QM and Non-QM Concerns from Portfolio Lenders Lender Insight Potential Market Size Tips for Originating Non-QMs Types of Non-QMs Underwriting Changes Credit Risk Pricing Non-QMs Litigation Risk Technology Secondary Market Underwriting Guidelines Risk Retention Rating Non-Agency MBS with Non-QMs Increased Scrutiny Don't shut yourself out of 10 percent or more of the current originations market: Learn more about non-QM lending.

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