QM vs Non-QM: Understanding PMI Penetration Patterns

The 2024 mortgage market produced 6.2 million loans, with 4.6 million classified as QM or Non-QM. This chart segments those 4.6 million loans and examines private mortgage insurance (PMI) usage in each category.

We classify loans as likely PMI-present when CLTV exceeds 80%, a standard industry threshold. This proxy allows us to estimate MI penetration across the market using HMDA data—an approximation, but useful for understanding market structure.

QM originations skew heavily toward higher-CLTV lending (59% above 80%), reflecting the reality that most conventional lending today requires PMI to get deals done. First-time buyers, move-up buyers stretching on price—they're all leaning on PMI to bridge the down payment gap. The 42% below 80% CLTV represents borrowers with more equity or those who've saved larger down payments.

Non-QM shows a balanced split—nearly 50/50. This reveals two distinct borrower profiles. Lower-CLTV loans (49%) likely represent self-employed or alternative-income borrowers with substantial assets. Higher-CLTV loans (51%) are borrowers who need Non-QM's flexibility despite lower equity positions.

As MI costs continue factoring into affordability and Non-QM expands its role, understanding where MI concentrates reveals market segmentation patterns we can't ignore.