Which type of mortgage is described as a safe harbor qualified mortgage?

• A. Non-qualified mortgage
• B. High-cost mortgage
• C. Adjustable-rate mortgage
• D. Safe harbor qualified mortgages

Answer: (D)

Safe harbor qualified mortgages are loans that carry safe harbor protection under the ability-to-repay rule. They’re designed to be clearly compliant with the lender’s duty to verify a borrower’s ability to repay. These loans typically have fully amortizing, regular payments with no negative amortization, no interest-only periods, no balloon payments, and a term not exceeding 30 years. Points and fees are capped (often around 3% of the loan amount). Because the loan meets these strict criteria, lenders are presumed compliant with the borrower’s ability to repay and have strong protection from certain lawsuits.

Other loan types don’t carry this safe harbor unless they meet the same criteria. A non-qualified mortgage does not meet QM standards and lacks that protection; a high-cost mortgage involves additional cost restrictions; an adjustable-rate mortgage can be a safe harbor QM if it also meets all the qualifying criteria.