Which of the following loan types may be considered a qualified loan under ability-to-pay rules

Which of the following loan types may be considered a qualified loan under ability-to-pay rules
A . An interest-only mortgage
B . A loan with a balloon payment
C . A loan with negative amortization
D . A mortgage with an adjustable rate

View Answer

Answer: D

Explanation:

Under the Ability-to-Repay (ATR) Rule and Qualified Mortgage (QM) standards, mortgages with adjustable rates can be considered qualified mortgages if they meet certain criteria, such as having fully amortizing payments and adhering to limits on points and fees. Adjustable-rate mortgages (ARMs) are qualified as long as the borrower’s ability to repay is assessed using the maximum rate that could apply in the first five years.

Loans like interest-only mortgages (A), balloon payment loans (B), and negative amortization loans (C) are not typically considered qualified mortgages because they carry higher risks of default.

References:

CFPB Ability-to-Repay and Qualified Mortgage Rule

Dodd-Frank Act standards for Qualified Mortgages