What term refers to a loan that has not been modified to meet specific agency standards?

A non-conforming loan refers to a loan that does not meet the requirements set by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. These requirements typically involve limits on loan amounts, credit quality, and documentation standards.

When a loan does not adhere to these standards, it is considered non-conforming, which may be due to a wide range of factors, such as higher loan amounts (exceeding conforming limits) or unique borrower situations that do not qualify under standard guidelines. Non-conforming loans can often include jumbo loans—those exceeding conforming loan limits—or loans for borrowers with lower credit scores.

In contrast, conforming loans meet the established guidelines set forth by GSEs, high-risk loans typically refer to loans that have a higher probability of default, and qualified mortgages are designed to meet certain criteria that protect borrowers from risky lending practices, such as the ability to repay standards. This distinction is critical for understanding the types of mortgage options available in the market.