The new year is less than one month away and the Qualified Mortgage is on the verge of being implemented, leaving lenders to sift through how they anticipate to originate loans in 2014.

Top lenders like JPMorgan Chase (JPM), Bank of America (BAC) and Wells Fargo (WFC) announced that they will still work to provide for high-quality borrowers, including non-conforming loans that may fall outside of qualified mortgage lending standards. 

Wells Fargo Home Mortgage Executive Vice President Brad Blackwell said the bank will still ensure the borrower has the ability to repay, but they may not always meet the QM standards.

“We are not making changes to the way we lend to non-conforming borrowers, and it is not a loosening of credit. Wells Fargo is making very high quality loans today to high quality borrowers,” Blackwell said.

But Wells Fargo does not stand alone.

“From the product perspective we will continue to look for ways to serve the communities we are in, including where appropriate non-QM lending, under the over-arching theme of creating sustainable homeownership,” a Bank of America spokesperson said.

“We continue to support QM and see both avenues as integral to being able to serve our customers in a risk appropriate way,” Bank of America added.  

Blackwell explained that under QM, Wells Fargo would have to constrict in three areas: debt ratios over 43%, interest only loans and loans that do not meet the appendix Q guidelines.

These three distinct areas though fall mostly on the hands of affluent borrowers. A self-employed, but extremely successful potential homeowner could fall afoul of the new regulation.

In result, Blackwell explained that they trust their loan officers are able to distinguish between who is still a high quality borrower.

While the side of the market that meets Fannie Mae and Freddie Mac requirements will automatically fall under QM rules, the jumbo market, in particular, is where it becomes more difficult for borrowers, Blackwell said.

But banks like JPMorgan Chase are willing to still take on the loans.

“We will continue making very high quality loans like jumbo interest only loans for qualified buyers,” a spokesperson for JPMorgan Chase said.

According to Blackwell, about 5% of the loans that Wells Fargo produces will not fall within QM standards, which is where majority of the three distinct divisions he mentioned fall into.

Wells Fargo will continue to cater to this group of borrowers, but Blackwell explained that is the group of borrowers that have strong credit and a clear ability to repay.  In result, the non-QM loans will stay in Wells Fargo’s portfolio. 

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