What does the term "qualified residential mortgage" refer to?

The term "qualified residential mortgage" specifically refers to a mortgage that meets the standards set by the Dodd-Frank Act. These standards were established to ensure that borrowers can afford their loans and to promote responsible lending practices. Qualified residential mortgages are designed to lower the risk of default by requiring borrowers to demonstrate their ability to repay and by restricting certain high-risk features, like excessive fees or terms that could lead to a payment shock.

These standards help to create a broad framework aimed at protecting consumers and ensuring the stability of the housing market after the financial crisis. By achieving compliance with these regulations, lenders can also benefit from certain exemptions from risk retention requirements, making these mortgages more appealing in the secondary mortgage market.

Other options reflect aspects that do not encompass the full definition of a qualified residential mortgage and thus do not pertain to the context of the Dodd-Frank Act’s regulations. For instance, the notion of a mortgage backed by private insurance, exclusive availability to first-time buyers, or being limited to variable interest rates does not align with the qualifying criteria established under the legislation. These factors do not define the core protective aim of the qualified residential mortgage designation.