A Qualified Mortgage (QM) is a loan that meets the CFPB's Ability to Repay (ATR) rule and provides the lender with safe harbor or rebuttable presumption protection against borrower claims. For MLOs, originating QM loans reduces legal exposure. For borrowers, QM status limits certain loan features that are considered predatory.
QM Requirements
- ✦Maximum DTI of 43% (the GSE patch provided an alternative ATR pathway for DU/LP approvals, though its application has narrowed).
- ✦No interest-only periods.
- ✦No negative amortization.
- ✦No balloon payments except under specific small-creditor or rural balloon QM definitions.
- ✦Points and fees cannot exceed 3% of the loan amount for loans over $110,000.
Safe Harbor vs. Rebuttable Presumption
Safe harbor applies to loans priced at or below APOR plus 1.5% (prime QM). The lender is presumed to have complied with ATR and the borrower cannot challenge this in most circumstances. Rebuttable presumption applies to loans priced above APOR plus 1.5% but below APOR plus 2.25% (higher-priced QM). The borrower can attempt to show the lender failed to consider their ability to repay, but the standard of proof is high.
Non-QM Does Not Mean Illegal
Non-QM loans can still comply with the ATR rule; they just do not receive QM safe harbor protection. The lender bears more legal exposure on non-QM loans, which is reflected in the risk-based pricing and overlays common in the non-QM market. Non-QM is not predatory by definition. It is a higher-risk product from the lender's regulatory standpoint, and responsible non-QM origination requires thorough ATR documentation.
Aria can explain QM versus non-QM distinctions, identify which programs carry safe harbor protection, and walk through ATR documentation requirements for any loan type. Ask at vicariointel.com.
7-day free trial. No credit card required.
Ask Aria About Qualified Mortgage and ATR Requirements →