Which feature is NOT included in the Dodd-Frank Act definition of a qualified mortgage?

The Dodd-Frank Act defines a qualified mortgage (QM) as a loan that meets specific criteria designed to ensure that borrowers can repay their loans. One of the fundamental principles of a qualified mortgage is that it should be less risky for borrowers, which is why certain features are prohibited or restricted under this definition.

Interest-only loan offerings are not included in the definition of a qualified mortgage because they can lead to increased risk for borrowers. In an interest-only loan, the borrower pays only the interest for a certain period, which means that they are not building equity in the property. Once that period ends, the borrower must start paying off the principal along with interest, which can significantly increase monthly payments. This structure can make it more challenging for borrowers to manage their finances, creating the potential for default.

In contrast, features such as no excessive upfront points and fees, limits on debt-to-income ratios, and terms not exceeding 30 years are included in the QM definition to protect borrowers and promote responsible lending practices. By establishing these criteria, the Dodd-Frank Act aims to reduce the likelihood of borrowers becoming overwhelmed by their mortgage obligations.