Which features are prohibited in a Qualified Mortgage due to risk concerns?

Prepare for the Qualified and Non-Qualified Mortgage Test with comprehensive flashcards and multiple-choice questions. Ensure you understand every concept with detailed hints and explanations.

Qualified Mortgages are designed to limit repayment risk by banning features that can hide payment shocks or grow the loan balance. Negative amortization occurs when the payments made don’t cover all the interest due, causing the loan balance to increase over time. Interest-only payments delay principal repayment, so the borrower doesn’t build equity and can face higher payments later. Balloon payments require a large final payment, which borrowers may not be able to afford when it comes due. Because these features introduce significant risk, they’re prohibited in QM loans, and balloons are barred as well. The option that includes both negative amortization and interest-only payments—and notes balloons—captures all of these prohibitions, making it the best choice.