Which statement about qualified mortgages is true?

• A. They come with a presumption of compliance that the borrower meets ability to repay standards
• B. They require higher interest rates
• C. They ignore borrower debt obligations
• D. They always require mortgage insurance

Answer: (A)

Qualified mortgages are designed to align with the ability-to-repay rule. When a loan fits the defined QM criteria, it is treated as meeting the borrower’s ability to repay, giving the lender a safe harbor from certain lawsuits if the loan complies with those rules. This presumption doesn’t guarantee perfect repayment, but it reduces the lender’s risk by signaling that the required checks—such as verifying income and ensuring conditions like affordable payments and no harmful features—were met. It’s not about charging higher interest rates or mandating mortgage insurance in all cases; those are separate aspects and don’t define a QM. It also doesn’t ignore debt obligations—QM rules require consideration of the borrower’s debts and overall ability to repay.