What features are NOT included in Qualified Mortgages?

Qualified Mortgages (QMs) are designed to provide protection to consumers by ensuring that loans meet specific criteria to make them more sustainable and limit risky lending practices. Features that are not included in QMs are those that can potentially lead to higher borrower default rates or create payment shock.

Negative amortization occurs when the payments made are less than the interest accrued, resulting in an increasing loan balance over time rather than a decreasing one. This type of loan can lead to borrowers owing more than their original debt, which can be particularly harmful if property values decline.

Interest-only payment options allow borrowers to pay only the interest for a certain period. While this creates lower initial payments, it can result in significant payment increases once the interest-only period ends, making it harder for borrowers to manage their finances.

Loans with terms exceeding 30 years can also lead to potential risks similar to those caused by the features mentioned above. Longer loan terms can result in higher total interest payments over the life of the loan and may incentivize lenders to provide loans with less rigorous underwriting standards.

Since all of these features can lead to greater financial strain on borrowers, they are not included in the definition of Qualified Mortgages. This is to ensure that loans are more likely to be manageable and sustainable