Which of the following is a 'risky feature' that would prevent QM status?

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Multiple Choice

Which of the following is a 'risky feature' that would prevent QM status?

A risky feature in this context means a loan feature that undermines the borrower’s ability to repay and would disqualify the loan from being a Qualified Mortgage. Negative amortization is the clearest example because it allows the loan balance to grow even though payments are being made. When the unpaid interest is added to the principal, the loan becomes larger over time, making future payments less predictable and the borrower less likely to be able to repay as agreed. That violated the fully amortizing, predictable-payment expectation that defines a Qualified Mortgage, so it would prevent QM status. High upfront interest rate by itself isn’t the same kind of risk feature that automatically disqualifies a QM, since the loan could still meet other QM criteria if the payment structure and other requirements are satisfied. Interest-only or balloon features can be risky too, but the way negative amortization directly increases loan balance makes it the most clear-cut disqualifier here.

A risky feature in this context means a loan feature that undermines the borrower’s ability to repay and would disqualify the loan from being a Qualified Mortgage. Negative amortization is the clearest example because it allows the loan balance to grow even though payments are being made. When the unpaid interest is added to the principal, the loan becomes larger over time, making future payments less predictable and the borrower less likely to be able to repay as agreed. That violated the fully amortizing, predictable-payment expectation that defines a Qualified Mortgage, so it would prevent QM status.

High upfront interest rate by itself isn’t the same kind of risk feature that automatically disqualifies a QM, since the loan could still meet other QM criteria if the payment structure and other requirements are satisfied. Interest-only or balloon features can be risky too, but the way negative amortization directly increases loan balance makes it the most clear-cut disqualifier here.

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