Qualified mortgages are characterized by which feature?

• A. They require no documentation
• B. They exclude ability to repay standards from consideration
• C. They rely exclusively on collateral value
• D. They involve a presumption of compliance with the ability to repay standards

Answer: (D)

The main concept is that a Qualified Mortgage carries a presumption that the lender has complied with the ability-to-repay obligation. When a loan meets specific criteria (such as limits on points and fees, a valid repayment term, and no risky features like negative amortization, interest-only payments, or balloons), regulators treat it as demonstrating the borrower’s ability to repay. This gives the lender a safe harbor or presumption that ATR has been satisfied, reducing liability if questions about repayment arise later.

Other options don’t fit because a QM isn’t about skipping documentation, ignoring ATR, or relying only on collateral value. Instead, the defining feature is the presumption of ATR compliance for loans that meet the standard criteria.