Which statement is true about qualified mortgages in relation to the ability-to-repay standard?

• A. They come with a presumption of compliance that the borrower meets ability to repay standards
• B. They ensure automatic approval
• C. They waive all underwriting requirements
• D. They require no documentation

Answer: (A)

The idea being tested is how qualified mortgages relate to the ability-to-repay requirement. A qualified mortgage is designed to create a safe harbor—a presumption—that the lender has met the ability-to-repay standard if the loan meets certain features. When a loan is a QM, it is presumed to satisfy ATR obligations, which reduces the lender’s risk of liability for not properly assessing the borrower’s ability to repay.

That’s why the statement stating there is a presumption of compliance with ability-to-repay standards is the best choice. It captures the essence of how QM status works: meeting specific criteria (such as being fully amortizing, having a term of 30 years or less, and conforming to points-and-fees limits, along with proper documentation) signals ATR compliance.

Automatic approval is not a feature of qualified mortgages; QM status does not guarantee that a loan will be approved. Likewise, QM does not waive underwriting requirements or eliminate documentation. Lenders still perform underwriting and verify income, assets, and other factors to ensure the loan qualifies as a QM and to support ATR compliance.