Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. In many cases, non-conforming loans can be funded by hard money lenders, or private institutions/money. A large portion of real-estate loans are qualified as non-conforming because either the borrower's financial status or the property type does not meet bank guidelines. Non-conforming loans can be either A-paper or subprime loans.
The flexibility of private money can allow for a much wider range of deals to be funded, although more detailed and substantive collateral and documentation may be required by a lender.
Residential non-conforming loans are strictly regulated, usually with much higher rates than banks. Some states have legal limits against non-conforming loans for residential real estate.
OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT SEEKING PUBLIC COMMENT ON PROPOSED GUIDANCE ON CONFORMING LOAN LIMIT CALCULATIONS
Jun 25, 2007; The Office of Federal Housing Enterprise Oversight issued the following press release: PROPOSED GUIDANCE ON CONFORMING LOAN LIMIT...