What is a "Qualified Mortgage" (QM)?

What is a "Qualified Mortgage" (QM)?

• A. A type of loan with no interest
• B. A category of loans that meet specific underwriting standards
• C. A loan that allows for negative amortization
• D. A mortgage that does not require a down payment

Answer: (B)

A "Qualified Mortgage" (QM) is defined as a category of loans that adhere to specific underwriting standards set by the Consumer Financial Protection Bureau (CFPB). These standards are designed to ensure that borrowers have a reasonable ability to repay their loans, which ultimately helps prevent defaults and promotes responsible lending practices. Qualified Mortgages typically have features that protect borrowers, such as limits on points and fees, and they cannot have certain risky features like interest-only payments or negative amortization. By meeting these rigorous underwriting criteria, a QM provides additional security for both lenders and borrowers, fostering a more stable mortgage market. The other options describe loan features that do not align with the established definition of a Qualified Mortgage, highlighting the unique standards that give QMs their regulatory and market significance.

A "Qualified Mortgage" (QM) is defined as a category of loans that adhere to specific underwriting standards set by the Consumer Financial Protection Bureau (CFPB). These standards are designed to ensure that borrowers have a reasonable ability to repay their loans, which ultimately helps prevent defaults and promotes responsible lending practices.

Qualified Mortgages typically have features that protect borrowers, such as limits on points and fees, and they cannot have certain risky features like interest-only payments or negative amortization. By meeting these rigorous underwriting criteria, a QM provides additional security for both lenders and borrowers, fostering a more stable mortgage market.

The other options describe loan features that do not align with the established definition of a Qualified Mortgage, highlighting the unique standards that give QMs their regulatory and market significance.