Are loans with negative amortization considered QM?

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Multiple Choice

Are loans with negative amortization considered QM?

Loans that carry negative amortization do not meet QM because QM requires fully amortizing payments where the loan balance declines over time. Negative amortization lets the balance grow when payments don’t cover interest, undermining the borrower’s ability to repay and defeating the protective intent of the QM safe harbor. There isn’t a condition under which a negatively amortizing loan would qualify as QM; the feature itself disqualifies it, so it’s not considered QM.

Loans that carry negative amortization do not meet QM because QM requires fully amortizing payments where the loan balance declines over time. Negative amortization lets the balance grow when payments don’t cover interest, undermining the borrower’s ability to repay and defeating the protective intent of the QM safe harbor. There isn’t a condition under which a negatively amortizing loan would qualify as QM; the feature itself disqualifies it, so it’s not considered QM.

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