We are going through the process of deciding whether we’re going to make non-QM loans or not. It appears we’ll be making them, but working to measures in place to mitigate the risks.
One risk is that the customer says in court proceedings that they provided us with information that indicated their inability to repay their loan and we end up in a “he said, she said situation”. What if we had a form that listed all of the liabilities and listed the income of the borrowers (or referenced back to the final application) and it included the statement that this information is complete and accurate and there is no additional information the bank would need to know that would impact the bank’s assessment of the customer’s ability to repay this loan? Do you think such a document would help provide protections in a court proceeding over the ability to repay?
This is what the signed application is intended to do. I don’t think there is any harm in it and it might help in some situations; your legal counsel could give you a more informed recommendation of what might help reduce liability. Of course, it wouldn’t release you from verifying information you rely on to determine the applicant’s ability-to-repay.