What is defined as a loan that meets specific underwriting standards to minimize default risk?

A loan that meets specific underwriting standards to minimize default risk is referred to as a Qualified Residential Mortgage (QRM). The QRM framework was established to promote responsible lending practices by ensuring that mortgages are backed by strong financial underwriting criteria. This includes factors such as loan-to-value ratios, borrower credit history, and other characteristics that demonstrate the borrower's ability to repay the loan. By adhering to these standards, QRMs are designed to lower the likelihood of mortgage defaults, which benefits both lenders and borrowers in the long run.

The other options do not pertain directly to the underwriting standards aimed at minimizing default risk. The Equal Credit Opportunity Act (ECOA) focuses on preventing discrimination in lending practices rather than defining acceptable underwriting standards. Loss mitigation options refer to strategies that lenders can use to assist borrowers struggling to meet their loan payments, but these don’t address the initial underwriting process. The foreclosure process deals with the legal proceedings that occur when a borrower defaults on their mortgage, which is a separate concern from the standards set to prevent such defaults in the first place.