Chat
Chat with Sales Hours: Monday-Friday 8:30 a.m. - 4:30 p.m. (CST)
Contact Sales
Call Sales Toll-Free 1-(866) 774-3282 Hours: Monday-Friday 7 a.m. - 5 p.m. (CST)
Product Login
Product Log-in
Product Support
Product Support
Email Sales
Contact Sales
After Hours
  • Support
  • Sign In Sign In
  • AUS NZ UK
CoreLogic - Home
  • Solutions
    view solutions by:

    Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence

    Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker

    Mortgage

    • Point of Sale
    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax

    Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT

    Mortgage Lenders

    • Point of Sale
    • Origination

    Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring

    Mortgage Appraisers

    • Appraisal

    Real Estate Agents & Brokers

    • Agents & Brokers

    Real Estate MLS

    • Multiple Listing Enterprises

    Commercial Real Estate Owners

    • Commercial Property Tax

    Marketing Departments

    • Property Data

    Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification

    Construction Contractors

    • Restoration Contractors

    General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
  • Resources

    Reports

    • Climate Change
    • Construction Claims Bulletin
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index

    Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles

    More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes
  • Company
    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Search
CoreLogic - Home
  • Solutions
  • Resources
  • Company

    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Accounts

    • Products Sign-in
  • Contact

    • Sales Contact
    • Product Support
  • Regions

    • Australia
    • New Zealand
    • United Kingdom
  • Social

    • Facebook
    • Instagram
    • Linkedin
    • Twitter
    • Youtube
Solutions
VIEW BY:
  • Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence
  • Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker
  • Mortgage

    • Point of Sale
    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax
  • Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT
  • Mortgage Lenders

    • Point of Sale
    • Origination
  • Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring
  • Mortgage Appraisers

    • Appraisal
  • Real Estate Agents & Brokers

    • Agents & Brokers
  • Real Estate MLS

    • Multiple Listing Enterprises
  • Commercial Real Estate Owners

    • Commercial Property Tax
  • Marketing Departments

    • Property Data
  • Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification
  • Construction Contractors

    • Restoration Contractors
  • General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
Resources
  • Reports

    • Climate Change
    • Construction Claims Bulletin
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index
  • Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles
  • More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes

Home / Intelligence / Share of Non-Qualified Mortgages Increases in 2022, According to CoreLogic

ABOUT THE AUTHOR
Archana Pradhan
Archana Pradhan
Principal, Economist, Office of the Chief Economist
View Profile
  • June 1, 2022

Share of Non-Qualified Mortgages Increases in 2022, According to CoreLogic

Today’s Non-Qualified Mortgages: Limited Documentation and High Debt-To-Income Ratio but High Credit Score and Low Loan-To-Value Ratio

Any home loan that doesn’t comply the Qualified Mortgage (QM) rules is referred to as non-QM.[1] The Dodd-Frank Wall Street Reform and Consumer Protection Act imposed an obligation on lenders to make a good-faith effort to determine applicants have the ability to repay a mortgage, which is known as the ability-to-repay (ATR) rule. The act also mandates the QM cannot have risky loan features like negative-amortization, interest-only, balloon payments, terms beyond 30 years and no excessive points and fees. The QM must also satisfy at least one the following criteria:

  • a) Borrower’s debt-to-income (DTI) ratio must be 43% or less 
  • b) The loan must be eligible for purchase, guarantee or insurance by a government-sponsored enterprises (GSEs), Federal Housing Administration (FHA), US Department of Veterans Affairs (VA), or the US Department of Agriculture (USDA), regardless of the DTI ratio
  • c) 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 3 years.

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. Non-QM loans must satisfy the ATR requirements.

The non-QM share of total mortgage counts declined during the pandemic and reached its lowest level in 2020, at 2% of the market. However, the non-QM share has almost doubled in 2022, representing about 4% of the first mortgage market.[2] 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 or government channels. 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.

Figure 1 compares non-QM equivalent loans from 2001 to 2022 by using six major risk flags. All home-purchase loans not meeting at least one of the six QM mandated criteria are included. The three main reasons why non-QM loans originated in 2022 failed to fit in the QM box are: use of limited or alternative documentation, DTI above 43% and interest-only loans. 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. Share of non-QM loans exceeding 43% DTI threshold has increased and is now 3 times higher in 2022 than in 2014 level.

Similarly, the share of interest-only loans doubled in 2022 compared with the 2014 level. Notably the risker factors such as negative amortization and balloon payments have completely vanished.

Figure 1: Non-QM Equivalent Home-Purchase Loans by Composition of Risk Flags

Interest-only loans rising in recent years

Figure 1: Non-QM Equivalent Home-Purchase Loans by Composition of Risk Flags
Source: CoreLogic, 2022. Note: 2022 includes only the first 3 months (January to March).
© 2022 CoreLogic,Inc., All rights reserved.

Today’s non-QMs are high-quality loans. They are vastly different and less risky than the equivalent of non-QM loans originated prior to the Great Recession. Figure 2 shows the trend of 3 major factors of underwriting for all home purchase loans: credit score, DTI and loan-to-value (LTV) ratio. The average credit score of homebuyers with non-QM in 2022 was 771 compared to 776 for homebuyers with QMs and 714 for government loans. Similarly, the average LTV for borrowers with non-QM was 76%, compared to 77% for borrowers with QMs. However, average DTI for homebuyers with non-QMs was higher compared with the DTI for borrowers with QMs.

Figure 2: Underwriting Variables trends for Home Purchase Loans: 2001 to 2022 (Jan-March)

(Averages of Credit Score, LTV, and DTI)

Figure 2: Underwriting Variables trends for Home Purchase Loans: 2001 to 2022 (Jan-March)
Source: CoreLogic, 2022. Note: 2022 includes only the first three months (January to March).
© 2022 CoreLogic,Inc., All rights reserved.

Despite the high DTI ratios, non-QMs are performing very well today. Both the non-QM and QM loans have low delinquency rates (Figure 3). In fact, the serious delinquency rate for non-QM loans is just slightly higher than the rate for QM loans and significantly lower than for the government loans.

To offset the risk of default, lenders generally set a higher interest rate on non-QM loans; for instance, the average 30-year fixed initial interest rate for non-QM was 2.9% compared to 2.6% for QM loans in 2022. Also, lenders are attracted to borrowers with higher credit score and low LTVs to help offset the added risk from a high DTI, limited documentation and interest-only on non-QM loans.

In sum, non-QM loans have helped creditworthy borrowers who cannot otherwise qualify for traditional mortgage loan programs.

Figure 3: Delinquency Rate by Loan Type and Vintage Year for Home Purchase Loans: 2001 to 2022[3]

Figure 3: Delinquency Rate by Loan Type and Vintage Year for Home Purchase Loans: 2001 to 2022
Source: CoreLogic, 2022
© 2022 CoreLogic,Inc., All rights reserved.

[1] In January 2014, the Consumer Financial Protection Bureau (CFPB) issued a set of guidelines to provide safer and more stable home loans for consumers called as Qualified Mortgages (QMs).

[2] For this analysis, 2022 CoreLogic data includes only loans originated during the first three months of 2022 (January to March).

[3] The delinquency rates were much lower for the 2021 vintage and almost zero for the 2022 vintage as the loan applicants who were approved for a mortgage loan after March 2020 had not lost their job or business because of the pandemic or other reason.

© 2022 CoreLogic,Inc., All rights reserved.
  • Category: Blogs, Homebuying, Intelligence
  • Tags: Credit, creditrisk, Mortgage Underwriting
ABOUT THE AUTHOR
Archana Pradhan
Archana Pradhan
Principal, Economist, Office of the Chief Economist
View Profile

Related Posts

Wildfire Banner - Hazard HQ
Blogs

Wildfires in Canada Spreading, New Fires in Additional Provinces

Canada wildfires continue to burn across Alberta and new fires ignite in Nova Scotia, damaging homes near Halifax.

June 2, 2023
National flood insurance program coverage requirements
Blogs

Top Three Myths About Mandatory Purchase of Flood Insurance Coverage in Special Flood Hazard Areas Debunked

Just because national flood insurance program coverage is not required on a home, doesn’t mean a house should be uninsured.

June 2, 2023
Eye of the storm
Blogs

2023 Hurricane Risk Report

The 2023 Hurricane Risk Report provides insight into property risk, both nationally and by metro area, across single-family homes and multifamily homes from hurricane-driven wind and storm surge.

May 31, 2023

About Corelogic

  • Newsroom
  • Leadership
  • Careers
  • Ethics & Compliance

Accounts

  • Products Sign-in

Contact

  • Sales Contact
  • Product Support

Regions

  • CoreLogic Australia
  • CoreLogic New Zealand
  • CoreLogic UK

Follow & Connect

  • Facebook
  • Instagram
  • Linkedin
  • Twitter
  • YouTube
© 2023 CoreLogic. All rights reserved.
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility