UK Accounting Glossary
A non-conforming loan is a mortgage that does not meet the lending guidelines of Fannie Mae or other major secondary mortgage market participant, such as Freddie Mac. For instance, a loan that goes above the Fannie Mae lending limit, usually called a jumbo loan, is a non-conforming loan. A mortgage can be a non-conforming loan for many other reasons, too. A prepayment penalty automatically makes a mortgage a non-conforming loan. A loan originated with an excessively high loan to value (LTV) will be a non-conforming loan. The borrower with a sufficiently low credit score will not be able to get anything other than a non-conforming loan. The non-conforming loan will often have a higher interest rate than a similar conforming loan.
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This glossary post was last updated: 7th February 2020.