Qualified mortgages' presumption relates to the borrower's ability to repay standards. Which concept is most closely associated with this presumption?

• A. Debt-to-income optimization
• B. Ability to repay standards
• C. Appraisal value
• D. Insurance coverage

Answer: (B)

The key idea here is the borrower's ability to repay. Qualified mortgages carry a safe harbor because they are designed to meet ability-to-repay standards, meaning lenders must make a good-faith determination that the borrower can afford the loan terms based on factors like income, assets, debts, employment, and the monthly payment. If a loan qualifies as a QM, the lender is presumed to have complied with these ability-to-repay requirements, providing certain protections.

While debt-to-income (DTI) is a metric often used in evaluating ability to repay, the concept being tested is the overall ability to repay standards. Appraisal value and insurance coverage do not relate to this presumption about repayment ability.