Which of the following describes a qualified mortgage under the Dodd-Frank Act?

A qualified mortgage, as defined by the Dodd-Frank Act, refers to a loan that meets specific ability-to-repay criteria established to protect consumers from taking on loans that they cannot afford. The ability-to-repay rule requires lenders to evaluate a borrower's financial situation comprehensively, including their income, assets, employment status, credit history, and other relevant financial factors. The underlying principle is to ensure that borrowers can comfortably repay their loans without facing undue financial hardship.

Meeting these criteria not only safeguards consumers but also provides certain protections to lenders from legal challenges regarding borrower defaults. The classification as a qualified mortgage can lead to various benefits for lenders as well, including reduced legal risk in cases of foreclosure. Thus, the ability-to-repay requirement encapsulates the essence of what qualifies a mortgage under these regulations, making it a cornerstone of responsible lending practices introduced by the Dodd-Frank Act.