What can happen to lenders if they do not adhere to QM?

Lenders must adhere to Qualified Mortgage (QM) standards to maintain certain legal protections under the Dodd-Frank Act. If they fail to meet these standards, they can lose the safe harbor protection that QM provides. Safe harbor signifies that a loan that meets QM criteria is presumed to comply with the ability-to-repay requirements. Without this designation, lenders expose themselves to potential legal challenges and liabilities, as they can no longer claim that they have made loans in compliance with the regulations aimed at protecting consumers.

The loss of this safe harbor means that borrowers may have more grounds to sue for wrongful loan origination practices, significantly increasing the risks for lenders. This aspect is crucial for understanding the significance of adhering to QM guidelines, as it directly affects a lender's legal standing and risk exposure in lending practices.

The other options do not accurately reflect the consequences of not adhering to QM. Lenders do not simply face penalties while retaining protections; those protections are integral to QM itself. Furthermore, not following QM guidelines does not lead to guaranteed market share growth or guaranteed protection from litigation, which misconstrues the intent and consequences of the QM framework.