What prevents non-QM loans from closing? The devil is in the detail
More applications for non-QM loans might close if lenders and originators beefed up efforts to address missing or outdated information, according to a new Computershare study.
Incomplete information stops over 22% of non-QM applications from closing, the study found.
"It's vital that borrowers and originators ensure that the i's are dotted and the t's crossed on their applications to avoid unnecessary problems," Tom Millon, CEO of Computershare Loan Services, said in a press release.
Follow-up as simple as confirmation of delivery by mail was lacking in nearly 3% of applications, "suggesting a lack of training or in-line qualify reviews among originators," according to Computershare.
The three main types of issues that caused non-QM applications to fail were credit, 55%; compliance and regulatory issues, 38%; and property or collateral issues, 7%.
Nearly 11% of compliance and regulatory issues resulted from shortcomings related to closing disclosures.
A "large proportion of applications coming from brokers" may play a role in why lenders have difficulty closing the loop on information, the company said in its press release.
The findings in the Computershare study came from its analysis of due diligence loan reviews it conducted over the course of a year. All the reviews were done on a post-close basis.
Loans made outside the qualified mortgage safe harbor are currently subject to increased liability under the Consumer Financial Protection Bureau's ability-to-repay rule.
Currently, only private market loans are subject to the QM safe harbor. The government-sponsored enterprises have a temporary exemption from it and government-insured loans have a permanent exemption.