chunks.json

["# NonQM Glossary \\& Scenarios", "Last edited by Dhruv Ratra (Polaris24) 5 days ago A", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Ability-to-Repay\n(ATR) | Federal rule (TILA § 1026.43) requiring lenders to make a reasonable determination that the\nborrower can repay the loan. Non-QM loans must still satisfy ATR, even though they don't\nmeet the \"Qualified Mortgage\" safe-harbor tests. | ATR Rule  |\n|  Asset-Depletion\nLoan | Underwriting method that treats a borrower's liquid assets (bank, brokerage, retirement\naccounts) as imputed income to meet ATR. | Asset Utilization,\nAsset-Qualifier  |\n|  Automatic Value\nModel (AVM) | Computer-generated estimate of property value, often used for DSCR or portfolio reviews\nwhen a full appraisal isn't required. |   |", "B", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Bank-Statement Loan | Loan qualified primarily on 12-24 months of personal or business bank statements\ninstead of tax returns. Common for self-employed borrowers. | BS Loan, Alt-Doc Bank\nStatement  |\n|  Blanket Loan | Single mortgage that covers multiple properties or units. Useful for portfolio\ninvestors. | Portfolio Loan  |\n|  Borrower Paid\nCompensation (BPC) | When the borrower, not the lender, pays the mortgage broker's commission. |   |", "C", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Cash-Flow Coverage Ratio | See Debt-Service-Coverage Ratio (DSCR). |   |\n|  CLTV (Combined Loan-to-Value) | Total liens on the property + appraised value. Includes first, second, and HELOC\nbalances. |   |\n|  Credit Event Seasoning | Elapsed time since negative credit events (BK, foreclosure, short sale).\nMeasured in months. | Seasoning Period  |\n|  Credit Score\n(FICO®/VantageScore®) | Numeric measure of credit risk. Many Non-QM programs go as low as 600-620. | FICO, Beacon\nScore  |", "D", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Debt-Service-Coverage Ratio\n(DSCR) | Net operating income + total property debt service. For rental/investor loans a\nDSCR $\\times 1.0$ indicates the rent covers the payment. | Cash-Flow\nCoverage Ratio  |\n|  Documentation Level | Spectrum of required borrower docs (Full-Doc, Alt-Doc, Lite-Doc, No-Doc). |   |\n|  DTI (Debt-to-Income) Ratio | Total monthly debt payments + gross monthly income. Non-QM allows higher\nDTIs (e.g., 55 \\%). |   |", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Exit Strategy | How a short-term bridge or fix-and-flip loan will be repaid or refinanced. |   |\n|  Extension Fee | Charge to prolong a short-term (bridge) loan past its original maturity. |   |", "# F", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Foreign National\nLoan | Mortgage to a non-U.S. citizen who resides abroad; qualifies on foreign\ncredit/income or asset-depletion. | ITIN Loan (if borrower has Individual\nTaxpayer ID)  |\n|  Full-Doc | Standard underwriting with tax returns, W-2s/1099s, pay stubs. Opposite of\nAlt-Doc. |   |", "G", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Gift of Equity | Seller (often family) gives part of home equity toward buyer's down payment; allowed under\nsome Non-QM guidelines. |   |\n|  Guideline\nMatrix | Table showing max LTV/FICO/DTI tiers for a given product. | Rate Sheet, Eligibility\nGrid  |", "H", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  HCLTV (High-Credit\nLoan-to-Value) | LTV calculation that factors in the credit limit of a HELOC, not just the current\ndraw. |   |\n|  Hard Money Loan | Asset-based short-term loan (12-24 mo) often used for rehab or bridge\nfinancing. | Private Money  |", "I", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Interest-Only\n(IO) | Payment structure where borrower pays only interest for a set period (e.g., 10 yrs), after which\namortization begins or balloon payment is due. |   |\n|  ITIN Borrower | Individual with an IRS Individual Taxpayer Identification Number (not SSN). Often qualifies under\nForeign National or Alt-Doc programs. |   |", "J", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Jumbo (Non-Agency)\nLoan | Loan amount above conforming limits, not sold to Fannie/Freddie. May be QM or\nNon-QM. |   |", "K", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Key Rate Adjustment | Rate bump applied when certain credit factors fall outside matrix tiers (e.g., recent BK). |   |", "L", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Lender Paid Compensation\n(LPC) | Broker comp paid by the lender via higher rate/YSP. |   |\n|  Loan Program | Defined set of eligibility \\& pricing rules (e.g., \"12-Month Bank Statement, 90 \\% LTV,\nNo MI\"). | Product, Shelf  |\n|  Loan-to-Cost (LTC) | For rehab/ground-up builds: loan amount + total project cost. |   |\n|  LTV (Loan-to-Value) | First lien amount + appraised value. |   |", "M", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Margin (ARM) | Fixed spread added to index rate on adjustable loans. |   |\n|  Minimum DSCR | Lowest acceptable DSCR for an investor loan (often 0.75-1.00). |   |", "N", "|  Term | Definition | Synonyms / Aliases  |\n| --- | --- | --- |\n|  Non-QM (Non-Qualified\nMortgage) | Any mortgage that fails at least one of the CFPB's QM safe-harbor tests (e.g., 43 \\% DTI,\npoints \\& fees, APOR threshold, doc type). Still must meet ATR. |   |\n|  No-Ratio Loan | Underwriting disregards borrower's DTI; focuses on collateral or assets. | NINA (No Income,\nNo Asset)  |", "0", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Originator Compensation\nRule | CFPB rule limiting how brokers are paid (no steering based on comp, no dual comp).\nApplies equally to Non-QM. |   |\n|  Occupancy Types | Primary Residence, Second Home, Non-Owner-Occupied (Investor). Eligibility \\& pricing\nvary widely in Non-QM. |   |", "P", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  |   |   |", "| Points \\& Fees Cap | QM loans limited to $3 \\%$ of loan amount; Non-QM has no cap but high points affect pricing \\& demand. |  |\n| :--: | :--: | :--: |\n| Prepayment Penalty | Fee for paying off loan early. Common in investor DSCR loans (e.g., 3-2-1 step-down). | PPP |\n| Profit-and-Loss (P\\&L) Statement Loan | Alternate doc type where CPA-prepared P\\&L (with or without statements) substantiates income. |  |", "Q", "| Term | Definition | Synonyms / <br> Aliases |\n| :-- | :-- | :-- |\n| QM (Qualified <br> Mortgage) | Loan meeting CFPB safe-harbor criteria (points/fees, APOR, doc type, DTI or price-based <br> test). Opposite of Non-QM. |  |", "R", "| Term | Definition | Synonyms / Aliases |\n| :-- | :-- | :-- |\n| Rate Buy-Down | Paying points at closing to secure lower note rate; thresholds differ in Non-QM pricing engines. |  |\n| Reserves | Liquid assets required post-closing, expressed in months of PITIA. Non-QM often requires 6-12 mo. |  |", "S", "| Term | Definition | Synonyms / <br> Aliases |\n| :-- | :-- | :-- |\n| Scratch-and-Dent <br> Loan | Previously funded loan with documentation/servicing defects that render it unsaleable to <br> agencies-often securitized in Non-QM pools. | $S-\\&-D$ |\n| Seasoning (Title) | Time elapsed since acquisition or cash-out refinance. Affects max LTV for flips. |  |\n| Self-Employed <br> Borrower | $\\geq 25 \\%$ ownership in business; usually underwrites via Bank-Statement or Full-Doc 2-yr returns. |  |", "T", "| Term | Definition | Synonyms / <br> Aliases |\n| :-- | :-- | :-- |\n| Twelve-Month Bank Statement <br> Program | Counts average monthly deposits over 12 months as qualifying income. | 12-Mo BS |\n| TILA-RESPA Integrated Disclosure <br> (TRID) | CFPB rule dictating Loan Estimate (LE) \\& Closing Disclosure (CD) timing. Applies <br> equally to Non-QM. |  |", "U", "| Term | Definition | Synonyms / <br> Aliases |\n| :-- | :-- | :-- |\n| Underwriting Flexibility | Degree to which a lender will grant exceptions to stated guidelines (e.g., manual ATR <br> calculation, compensating factors). <br> (c) Copyright 2020 MyScaler - NetTantra Technologies. All rights reserved. |  |", "UWM (Ultimate Weighted Margin)", "Proprietary pricing metric some aggregators use for Non-QM bulk bids.", "V", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Verification of Employment\n(VOE)-Only Loan | Uses independent VOE to document income instead of pay stubs/tax\nreturns. | VOE Program  |\n|  VOI / VOA | Verification of Income / Verification of Assets via automated services (e.g.,\nPlaid, Finicity). |   |", "# W", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Written Explanation Letter\n(LOE) | Borrower letter clarifying derogatory credit or cash-flow anomalies; often requested in\nNon-QM. | Letter of\nExplanation  |\n|  Wholesale Lender | Lender funding loans through third-party mortgage brokers. Dominant distribution\nchannel for Non-QM. |   |", "X, Y, Z", "|  Term | Definition | Synonyms /\nAliases  |\n| --- | --- | --- |\n|  Yield-Spread Premium\n(YSP) | Extra rate margin paid to broker when lender covers their comp (see LPC). |   |\n|  Zero-Prepay | Non-QM loan structure with no prepayment penalty—rare for DSCR but used in\nowner-occupied products. |   |", "## Comments", "1 Dhruv Ratra (Polaris24) @dhruv.ooIaris24 $\\cdot 2$ weeks ago Abbreviation Quick Reference ATR $\\cdot$ AVM $\\cdot$ BS $\\cdot$ CLTV $\\cdot$ DSCR $\\cdot$ DTI $\\cdot$ FICO $\\cdot$ HCLTV $\\cdot$ IO $\\cdot$ ITIN $\\cdot$ LTV $\\cdot$ LTC $\\cdot$ LPC $\\cdot$ MSA $\\cdot$ NINA $\\cdot$ QM $\\cdot$ PPP $\\cdot$ TRID $\\cdot$ VOE $\\cdot$ VOI/VOA $\\cdot$ YSP", "2 Dhruv Ratra (Polaris24) @dhruv.ooIaris24 $\\cdot 2$ weeks ago", "## Example Scenarios", "1. Bank-Statement Loan — Income Calculation", "|  Detail | Input  |\n| --- | --- |\n|  Borrower | Self-employed graphic-design studio owner  |\n|  Program | 12-Month Personal Bank-Statement  |\n|  Deposits | $\\$ 18,000$ average monthly credits  |\n|  Expense Factor | $50 \\%$ (per lender matrix)  |", "Qualifying Income:", "Traditional tax returns showed only $\\$ 45 \\mathrm{k}$ AGI-insufficient. Under the Non-QM program, the borrower now meets the ATR test for a $\\$ 600 \\mathrm{k}$ purchase at $90 \\%$ LTV. 2. DSCR Rental Loan", "|  Detail | Input  |\n| --- | --- |\n|  Monthly Gross Rent | $\\$ 2,500$  |\n|  Property Taxes \\& Insurance | $\\$ 300$  |\n|  Mortgage P\\&I (interest-only, year 1) | $\\$ 1,800$  |", "DSCR: $\\$ 2,500 /(\\$ 1,800+\\$ 300)(\\$ 2,500 /(\\$ 1,800+(\\$ 300)=1.19$ Lender's minimum DSCR is 1.00 , so the investor qualifies even without W-2 income. 3. Asset-Qualification / Asset-Depletion / Asset-Utilization", "|  Detail | Input  |\n| --- | --- |\n|  Liquid Assets | $\\$ 1200000$  |\n|  Amortization Term Assumed | 60 months  |\n|  Asset Utilization Factor | $100 \\%$ (no haircut)  |", "Imputed Monthly Income: $\\$ 1,200,000+60=\\$ 20,000 / \\mathrm{mo}$ Retired borrower with minimal pension now evidences enough \"income\" to pass ATR for a $\\$ 900 \\mathrm{k}$ cash-out refi. 4. Credit-Event Seasoning", "|  Detail | Input  |\n| --- | --- |\n|  Chapter 7 Bankruptcy Discharge | 18 months ago  |\n|  Lender Matrix | $\\geq 12 \\mathrm{mo}=\\mathrm{OK}$ to $80 \\% \\mathrm{LTV} ; \\geq 24 \\mathrm{mo}=\\mathrm{OK}$ to $90 \\% \\mathrm{LTV}$  |", "# Outcome:", "At 18 months seasoning, the borrower can obtain up to $80 \\%$ LTV but not $90 \\%$. Waiting six more months would open higher-LTV tiers. 5. Prepayment Penalty - 3-2-1 Step-Down", "|  Year Paid Off | Penalty Calculation  |\n| --- | --- |\n|  Year 1 | $3 \\%$ of outstanding principal  |\n|  Year 2 | $2 \\%$ of outstanding principal  |\n|  Year 3 | $1 \\%$ of outstanding principal  |\n|  Year 4+ | $0 \\%$  |", "If the investor prepays $\\$ 400 \\mathrm{k}$ principal in Year 2, penalty $=\\$ 400 \\mathrm{k} \\times 2 \\%=\\$ 8,000$. 6. Interest-Only (IO) Structure", "|  Detail | Input  |\n| --- | --- |\n|  Loan Amount | $\\$ 700 \\mathrm{k}$  |\n|  IO Term | 10 years (then 20-yr amortization)  |\n|  Note Rate | $7.25 \\%$  |", "Year 1 Payment: Interest-only $=\\$ 700,000 \\times 7.25 \\% / 12=\\$ 4,229$ Year 11 Payment (amortized): Factor for 20-yr @ $7.25 \\% \\approx \\$ 7.90$ per $\\$ 1 \\mathrm{k} \\rightarrow \\$ 7.90 \\times 700=\\$ 5,530$ Borrower's payment jumps about $\\$ 1,300$ when amortization kicks in-disclosed via TRID. 7. Foreign National Purchase", "|  Detail | Input  |\n| --- | --- |\n|  Borrower | Canadian citizen with no U.S. credit  |\n|  Program | Non-Owner-Occupled DSCR (min DSCR = 1.0)  |\n|  Down Payment | $25 \\%$  |\n|  Documentation | Passport, Canadian bureau report, CPA letter verifying income, 12 mo reserves  |", "As long as property cash flow covers debt service (DSCR $\\geq 1.0$ ), the borrower qualifies despite zero U.S. FICO. 8. High-DTI Compensating-Factor Exception", "|  Detail | Input  |\n| --- | --- |\n|  Calculated DTI | $54 \\%$ (lender matrix max $=49 \\%$ )  |\n|  Compensating Factors | DSCR 1.25, 12 mo reserves, 780 FICO, $50 \\%$ LTV  |", "Underwriting manager grants manual exception based on strong compensating factors-classic Non-QM flexibility.", "These examples demonstrate how Non-QM programs bend traditional rules-yet remain measurable and risk-managed-allowing borrowers and investors otherwise locked out of agency lending to secure financing."]