Recent data show that roughly one in ten U.S. mortgages no longer meet the federal Qualified Mortgage (QM) standard. Griffin Funding’s analysis of HMDA loan‑level data reports non‑QM originations reached $239 billion in 2025, representing about 10% of total mortgage volume by dollar amount. A separate metric from Optimal Blue confirms the trend, with non‑QM loans exceeding 10% of monthly rate‑lock volume in July 2026.
Why the shift?
The change began when the Consumer Financial Protection Bureau (CFPB) eliminated Appendix Q in 2021, a strict income‑documentation requirement for self‑employed borrowers. Although Congress twice proposed legislation to replace the appendix, the rule change proceeded without new congressional action. The replacement still relies on tax returns for self‑employment income, leaving many borrowers outside the QM box.
About 16.5 million Americans are self‑employed, including real‑estate investors, 1099 contractors, retirees, and others whose income or assets do not fit traditional underwriting models. These borrowers increasingly turn to private‑market documentation programs—such as bank‑statement loans and debt‑service‑coverage‑ratio (DSCR) loans—to qualify for mortgages, often at different pricing than conventional loans.
Documentation challenges for the self‑employed
Traditional underwriting counts only the income left after business deductions. Aggressive write‑offs that lower tax liability also reduce the income a lender can recognize, even though cash flow may be sufficient to afford a home. An Urban Institute study found home‑ownership rates among the self‑employed fell after the 2008 financial crisis, despite higher average earnings than salaried households, pointing to documentation hurdles rather than earning power.
Examples from Griffin Funding illustrate the gap. A Florida business owner who heavily wrote off income on tax returns was able to refinance his home using a bank‑statement loan that considered 12‑24 months of business deposits. Similarly, a Massachusetts professional qualified for a cash‑out refinance only after documenting deposits from a client‑trust account—something standard QM templates do not anticipate. Both borrowers had solid credit; their obstacle was paperwork.
Investor‑focused products also grow
Non‑QM lending includes more than documentation‑gap products. DSCR loans, which qualify borrowers based on a property’s rental income rather than personal income, enable investors to purchase rental properties through LLCs. Griffin Funding notes a Michigan medical‑practice owner used a DSCR loan to acquire a rental property without documenting personal income.
Overall, non‑QM loans accounted for $239 billion across 697,605 loans in 2025. In July 2026, they represented over 10% of total lock volume, up 1.4 percentage points from June and more than two points from a year earlier. Bank‑statement loans made up 30.6% of that volume, while investor and DSCR loans comprised 33.5%.
Credit quality remains strong
The shift does not appear to be driven by lower credit quality. Across all July locks, average credit scores held at 730 and debt‑to‑income ratios were lower than the previous year, indicating that borrowers remain financially sound even as more transactions fall outside the QM framework.
As of August 2026, no new legislation has been introduced to address the documentation gap. A search of Congress.gov shows no active bills, and housing‑policy trackers list no pending measures.
What this means for families
For families and individuals seeking homeownership, the growth of non‑QM products offers additional pathways to financing, especially for those whose income comes from self‑employment, gig work, or investment properties. While pricing may differ from conventional loans, the availability of these options helps preserve access to homeownership for a broader segment of the American populace.
Original reporting: El Paso News (HLL/CB) — read the source article.
