ATR - Ability To Repay

The definition of mortgage term: Ability To Repay

Ability to Repay is a standard implemented in 2010 by the Consumer financial Protection Bureau as part of the Dodd-Frank Act. Before extending a loan, lenders must make a reasonable determination as to whether the borrower will have a reasonable ability to repay the debt within the terms of the loan. This determination is based off of eight factors; the borrowers current income and assets, employment status, Monthly payment of mortgage obligations, monthly payment on subsequent loans, current debt obligations, Debt-to-income ratio, and the expected payment of the covered transaction. This standard was put into place to help minimize the number of foreclosures. Lenders cannot loan to borrowers that do not have the financial capacity to repay. If a loan meets the afore mentioned standards it is considered a qualified mortgage.

 

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