What Happens If a Mortgage Is Not a QM Loan?

Under the Dodd-Frank Act, a lender must make a good faith determination that a mortgage borrower has a reasonable ability to repay the loan before the loan is made. Due to the subjective nature of this standard, the Consumer Financial Protection Bureau issued regulations defining a "qualified mortgage" or "QM." Loans that meet the standards for being a QM receive a presumption of meeting the "ability to repay" test. Loans that fall outside of the QM definition create significant potential liability for the lender, and this potential liability may dissuade some creditors from making of non-QM loans