What is the purpose of a Qualified Mortgage (QM)?

The purpose of a Qualified Mortgage (QM) is fundamentally to establish certain criteria that lenders must follow to ensure that loans are more likely to be affordable for consumers, thereby protecting them from potential financial distress. One of the core objectives of the QM framework is to help promote responsible lending practices and to reduce the risk of default and foreclosure.

While some might view the guidelines as securing benefits for lenders, like limiting their legal liabilities, the overarching intent is primarily consumer protection and ensuring a level of loan quality that promotes good lending standards. A QM has well-defined features including limits on fees, debt-to-income ratios, and the absence of certain risky loan features, which together help ensure that borrowers can reasonably repay their mortgages.

This framework encourages lenders to make loans that are less likely to result in financial hardship for consumers, rather than merely focusing on legal protections for lenders. Thus, the selection of the correct answer reflects a misunderstanding of the primary purpose of QMs, as they are designed with consumer affordability and access in mind rather than merely providing legal shields for lenders.