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NON QM LOAN MAC

However, the average DTI ratio for homebuyers with Non-QM loans was higher when compared with borrowers with qualified mortgages.ĭespite the high DTI ratios, non-QMs are performing very well, CoreLogic said, noting that both Non-QM and qualified loans have low delinquency rates. Similarly, the average LTV ratio for borrowers with Non-QM loans was 76%, compared to 77% for borrowers with qualified loans. “Notably, the risker factors such as negative amortization and balloon payments have completely vanished,” Pradhan said.ĬoreLogic also reviewed the trend of three major factors for underwriting all home purchase loans: credit scores, DTIs and loan-to-value (LTV) ratios. According to its review, the average credit score of homebuyers with Non-QM loans in 2022 was 771, compared to 776 for homebuyers with qualified mortgages and 714 for government loans. The share of interest-only loans also doubled in 2022 compared to the 2014 level, CoreLogic said. “The share of Non-QM loans exceeding the 43% DTI threshold has increased, and is now three times higher in 2022 than in 2014,” it said.

“Almost 55% of the Non-QM borrowers used limited or alternative documentation 26% exceeded 43% DTI threshold and 23% of the Non-QMs were interest-only loans,” CoreLogic reported.

A debt-to-income (DTI) ratio above 43%, and.

Use of limited or alternative documentation.

In CoreLogic’s review of Non-QM loans, it found that the three main reasons a Non-QM loan originated in 2022 failed to fit into the qualified-mortgage box were: “Non-QM loans must satisfy the ATR requirements.” “A Non-QM loan is not necessarily a high-risk loan, however, as the inclusion of terms such as interest-only or limited/alternative documentation can increase the risk of repayment for lenders,” Pradhan said.

The loan must be originated by insured depositories with total assets less than $10 billion, and must be held in a portfolio for at least three years.

Department of Agriculture (USDA), regardless of the DTI ratio, and Department of Veterans Affairs (VA) or the U.S.

NON QM LOAN MAC

The loan must be eligible for purchase, guarantee, or insurance by a government-sponsored enterprise (GSE), such as Fannie Mae or Freddie Mac the Federal Housing Administration (FHA) U.S.

Borrower’s debt-to-income (DTI) ratio must be 43% or less.

The act also mandates that qualified mortgages cannot have risky loan features, such as negative-amortization, interest-only, balloon payments, or terms beyond 30 years, and also cannot have excessive points and fees.Ī qualified mortgage must also satisfy at least one the following criteria: The federal Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, imposed an obligation on lenders to make a good-faith effort to determine applicants have the ability to repay a mortgage, known as the ability-to-repay (ATR) rule. “Creditworthy borrowers - such as self-employed borrowers, first-time homebuyers, borrowers with substantial assets but limited income, jumbo loan borrowers and investors otherwise not qualifying for the GSE and government loans -may benefit from non-QM loan options.”Īny home loan that doesn’t comply with the federal Qualified Mortgage (QM) rules is referred to as a Non-QM loan. “Though the Non-QM loan is a small piece of today’s mortgage market, it plays a key role in meeting the credit needs for homebuyers not able to obtain financing through the GSE (government-sponsored enterprises) or government channels,” Archana Pradhan, chief economist for CoreLogic, said in a post on the company’s website. After falling to its lowest level during the pandemic, the share of non-qualified mortgages (Non-QM) has nearly doubled so far this year, according to a new report.ĬoreLogic, a provider of property information, analytics, and data-enabled solutions for the mortgage industry, reported this week that the Non-QM share of total mortgage counts has doubled from it lowest level in 2020, at 2% of the market, to about 4% of the first mortgage market, based on an analysis of loans originated during the first three months of 2022.