What are the main ATR (Ability-to-Repay) requirements for a mortgage loan?

• A. Lenders must assess ability to repay using verified income, assets, employment, and debt; Qualified Mortgage provides safe harbor when criteria are met.
• B. ATR requires no verification of income.
• C. ATR applies only to adjustable-rate loans.
• D. ATR is the same as the loan-to-value ratio.

Answer: (D)

Ability-to-Repay centers on lenders verifying and weighing a borrower’s financial picture—income, assets, employment, and existing debt—to determine if the borrower can reasonably repay the loan. The lender must use verified data and assess the proposed loan’s payments and terms, ensuring the decision is grounded in the borrower’s actual ability to repay. If the loan meets the criteria to be a Qualified Mortgage, the lender gains a safe harbor from certain liability claims, which encourages safer, well-documented underwriting. This approach contrasts with ideas that ATR has no income verification, applies only to adjustable-rate loans, or is simply the same as the loan-to-value ratio.