What type of ARM typically includes a provision that requires requalification if sold in the secondary market?

The type of Adjustable Rate Mortgage (ARM) that usually includes a provision requiring requalification if sold in the secondary market is the interest-only ARM. This mortgage type allows borrowers to pay only the interest for a specified period, leading to a situation where the principal does not decrease until the interest-only period ends. When these loans are sold in the secondary market, investors often need to ensure that the borrower can handle the future payment increases once the principal payments begin and the interest rate resets. Therefore, requiring requalification helps protect the investor's interests by confirming that the borrower remains capable of managing an increased payment, which can happen after the interest-only phase.

Hybrid ARMs, on the other hand, typically have a fixed interest period followed by adjustable rates. Since their structure changes after the fixed period, they may not have the same requalification stipulation, as investors generally assess the loan's risk based on the original terms. Fixed-rate mortgages maintain the same interest rate throughout the loan term, and convertible ARMs allow borrowers to convert to a fixed rate under certain conditions, but neither of these options typically involves a requalification process when sold in the secondary market.