Which of the following is NOT a characteristic of a Qualified Mortgage?

A Qualified Mortgage (QM) is a category of home loan that meets certain criteria established by the Consumer Financial Protection Bureau (CFPB) to ensure borrowers have a reasonable ability to repay their loans.

Negative amortization, where the loan balance increases instead of decreases because payments are insufficient to cover interest, is explicitly disallowed in the QM standard. This characteristic is important as it protects borrowers from the risk of growing debt, which could lead to financial hardship and potential foreclosure.

Additionally, QMs are designed to maintain standards that promote sustainable lending. They generally require that the debt-to-income (DTI) ratio does not exceed 43%, and they typically feature fixed monthly payments. They also must be for a loan that is secured by a primary residence, ensuring that the loans are linked to a stable asset.

By understanding these characteristics, it's clear that the correct identification of negative amortization as a non-qualifying feature aligns with the regulation's intent to promote responsible lending practices.