Which feature is considered toxic under the qualified mortgage (QM) rule?

Negative amortization is considered toxic under the qualified mortgage (QM) rule because it allows the loan balance to increase rather than decrease over time. In a negative amortization scenario, the borrower's payments may not be sufficient to cover the interest due on the loan, resulting in the unpaid interest being added to the principal balance. This can lead borrowers into a cycle of increasing debt, making it more challenging for them to pay off the loan.

The QM rule, established by the Consumer Financial Protection Bureau (CFPB), aims to protect consumers from risky lending practices and promote responsible lending. By prohibiting loans with negative amortization, the rule helps ensure that borrowers are not placed in a situation where their debt grows unexpectedly and unsustainably. This contributes to greater financial stability for borrowers and promotes sound lending practices among lenders.

Other features like partial amortization and an acceleration clause may pose risks in certain situations but do not inherently lead to an increase in debt like negative amortization does. Full amortization is generally viewed as a stable repayment structure under the QM rule since it ensures that borrowers will eventually pay off their loan over time.