An interest-only mortgage is considered a non-qualified mortgage (non-QM) under the Ability-to-Repay rule because:
Correct Answer
B) It defers principal payments during the interest-only period
Under the Ability-to-Repay (ATR) rule and Qualified Mortgage (QM) standards, loans that defer principal payments (such as interest-only mortgages) are generally considered non-QM loans. The QM rule requires that loans be structured to amortize over the loan term, which interest-only loans do not do during their initial period.
Why This Is the Correct Answer
Under the Ability-to-Repay (ATR) rule and Qualified Mortgage (QM) standards, loans that defer principal payments (such as interest-only mortgages) are generally considered non-QM loans. The QM rule requires that loans be structured to amortize over the loan term, which interest-only loans do not do during their initial period.
More Mortgage Knowledge Questions
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A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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