There’s been a lot of controversy surrounding non-traditional home loans in recent months. Just recently, a California Judge has reversed a previous court ruling that disallowed Change Lending from continuing to give out non-QM loans. According to reports, the federal judge determined that the previous decision, made by the U.S. Treasury Department, was not founded on correct information. They believe the ruling was based on a flawed analysis and mathematical errors.
The reversal of the decision will allow Change Lending to once again provide qualified mortgages to borrowers who need it most.
Reports show that the U.S. District Judge issued a temporary restraining order against Community Development Financial Institutions Fund, who ordered the revocation of Change Lending’s status as a QM-lender earlier in the year. The revocation led to a situation where Change Lending couldn’t be as flexible with underwriting when handing out loans. Due to being put in this unfair position, Change sued the CDFI fund.
Change argued that the federal government’s decertification was a result of incorrect calculations. The company argued that they only missed the qualification by less than 3 percentage points, and they had requested a review of the data before having their certification revoked.
While going through the facts of the case, it was discovered that Change has worked with many wealthy clients, like Johnny Depp. They’re one of the nation’s largest non-QM lenders and dealt with over $4.2 billion in volume last year.
Both sides are set to appear before a judge on September 15th.
Why Are Non-QM Loan Providers So Controversial?
Non-QM loans provide essential funding for borrowers who need it most, but they’re extremely risky. Traditional loan providers deny so many borrowers because they must meet very strict agency-standard requirements in order to approve a loan. Any borrower that doesn’t meet certain qualifications can’t get a loan because they could potentially default on that loan later.
As we all learned from the 2008 housing crisis, it’s never good to provide loans to individuals who are unlikely to be able to pay it back. It’s bad for the borrower, lender, and the entire economy.
That’s the exact reason why major regulations were passed after 2008. It’s also the reason why non-QM loans remain controversial still in 2023.
Non-QM loans aren’t the same as those bad subprime mortgages that caused the 2008 crisis, though. Subprime mortgages focused on the value of the property, whereas non-QM loans focus on the borrower’s ability to repay the loan. Non-QM loans offer more flexibility, but they do not rely on the property’s value alone to support the loan.
If you’re struggling to get traditional funding for your homeownership dreams, then our team here at Non-QM Home Loans can help. Rather than looking for reasons to deny you a loan, our team looks at your application and seeks out ways and reasons to approve you. We have over $1 billion in available capital, and we offer loans starting at a rate of 4.9%.
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