Can a lender make a mortgage loan without considering my ability to repay?

What the Law Says

The federal Ability-to-Repay (ATR) rule, implemented under the Dodd-Frank Act and codified in 15 U.S.C. § 1639, mandates that lenders must make a reasonable, good-faith determination of a borrower’s ability to repay a mortgage before extending credit.

This requirement applies to virtually all closed-end consumer credit transactions secured by a dwelling — including home purchase loans, refinances, and home equity loans.

Lenders must evaluate at least eight underwriting factors: current or reasonably expected income or assets; current employment status; monthly payment on the covered transaction; monthly payment on any simultaneous loan; monthly payment for mortgage-related obligations (e.g., property taxes, insurance); current debt obligations; alimony and child support; and credit history.

The law also establishes a 'qualified mortgage' (QM) category with stricter standards — such as prohibiting negative amortization, interest-only payments, balloon payments (with limited exceptions), and limiting points and fees — to help ensure borrowers can repay.

Statutory Text

The creditor shall make a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan…

— 15 U.S.C. § 1639 — Requirements for certain mortgages

Statutory Text

The creditor shall verify the consumer's income and assets, employment status, and other financial information relevant to the consumer's ability to repay the loan.

— 15 U.S.C. § 1639 — Requirements for certain mortgages

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