ATR Ability To Repay in Final Rule DFA
The final Ability-To-Repay rule describes certain minimum requirements for creditors making ability-to-repay determinations, but does not dictate that they follow particular underwriting models.
At a minimum, creditors generally must consider eight (8) underwriting factors:
- Current or reasonable expected income or assets;
- Current employment status;
- The monthly payment on the covered transaction
- The monthly payment on any simultaneous loan;
- The monthly payment for mortgage-related obligations;
- Current debt obligations, alimony and child support;
- The monthly debt-to-income ratio or residual income;
- Credit history;
To properly evaluate these 8 factors, the lender must use reasonable 3rd-party verified information. This simply means, for example, that current employment status as stated by the Borrower on a loan application must be verified by the Borrowers’ Employer as to the veracity and accurateness of the statement made on the loan application.
It should be noted that the Dodd-Frank Act creates special rights and defenses for borrowers whose lenders have failed to verify ability to repay. These rights include the ability to bring a private cause of action for damages (including for all finance charges and fees paid by borrower) within three (3) years from origination of the mortgage, and as a defense to foreclosure at any time during the life of the loan.