What type of mortgage protects the lender from claims of not complying with ability-to-repay requirements?

A qualified mortgage with a safe harbor status is designed to protect lenders from potential claims concerning their compliance with the ability-to-repay requirements. This type of mortgage typically involves standardized features that comply with regulatory guidelines, making it less risky for lenders. By adhering to these guidelines, lenders can demonstrate that they have effectively assessed the borrower's ability to repay the mortgage. The safe harbor status signifies that a loan has met the criteria established by regulations, which can shield lenders from liability if a borrower defaults.

The importance of this distinction lies in the changes brought about by the Dodd-Frank Act, which aimed to ensure that borrowers are not placed in situations where they cannot afford to repay their loans. Qualified mortgages, particularly those with safe harbor status, are designed to promote responsible lending practices and protect both lenders and consumers in the mortgage market.