Ability-to-Repay

Ability-to-Repay

Amongst other changes, the Dodd-Frank Act amended Regulation Z, which implemented the Truth-in-Lending Act (TILA). These changes prohibit lenders from providing mortgage loans without first assessing the borrower's ability-to-repay (ATR). As a result, the Consumer Financial Protection Bureau (CFPB) published a final rule outlining eight key underwriting factors that lenders must take into consideration prior to issuing credit.

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Monthly payment on any simultaneous loan

Current employment status

Current or reasonably expected income or assets

Monthly payment on the covered transaction

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Monthly payment for mortgage-related obligations

Monthly debt-to-income ratio or residual income

Current debt obligations, alimony, and child support

Credit history