Which option allows a borrower to switch from an ARM to a fixed-rate loan?

The conversion option is the correct answer because it specifically refers to a feature that allows borrowers to convert their adjustable-rate mortgage (ARM) into a fixed-rate mortgage under certain conditions. This option provides flexibility and security for borrowers who may be concerned about rising interest rates in the future.

With a conversion option, the borrower often has the right to lock in a fixed interest rate at a predetermined time during the loan term, making it a valuable choice for those who want to mitigate the risks associated with an ARM. This feature is beneficial as it provides borrowers with a way to stabilize their monthly payments if they feel the ARM is becoming financially burdensome due to interest rate fluctuations.

In contrast, the other options do not provide this specific feature. A conforming loan is a type of mortgage that meets certain guidelines set by government-sponsored entities but does not inherently offer a conversion to a fixed rate. A hybrid ARM typically starts with a fixed interest rate for a certain period before shifting to an adjustable rate, but it does not guarantee a switch back to a fixed-rate option later. A standard ARM offers variable interest rates throughout the life of the loan without any provided pathway to convert to a fixed rate. Therefore, the conversion option is the unique feature that allows borrowers to shift