What may occur if a lender does not meet QM Standards?

If a lender does not meet Qualified Mortgage (QM) Standards, they may face significant consequences, including the possibility of being liable for up to three years of interest and legal costs. QM Standards are designed to protect consumers by ensuring that loans are made based on a borrower’s ability to repay. When a lender fails to comply with these standards, they expose themselves to legal risks, including litigation from borrowers. If a borrower is approved for a loan that does not conform to QM Standards and subsequently defaults, the lender could be responsible for financial losses incurred by the borrower, which can include interest payments and legal fees.

The other options do not accurately reflect the potential repercussions of non-compliance with QM Standards. A small fine may not adequately represent the financial risk involved; reputation damage could occur, but it is not the only consequence; and increased loan processing fees are not a direct result of failing to meet QM Standards. Overall, the most significant and direct financial liability for lenders stems from the potential obligation to cover interest and legal costs associated with non-compliance.