Ability-to-Repay (ATR)
Federal rule requiring mortgage lenders to verify a borrower's ability to repay before originating a consumer-purpose loan.
The ATR rule (part of Dodd-Frank, codified at 12 CFR 1026.43) requires lenders to make a "reasonable, good-faith determination" that a borrower can repay a consumer-purpose mortgage. Eight factors must be considered: income, employment, monthly mortgage payment, monthly payment on simultaneous loans, monthly other obligations, current debt obligations, monthly DTI, and credit history. ATR does not apply to business-purpose loans (DSCR, fix-and-flip, ground-up construction).
Related terms
Qualified Mortgage (QM)
A category of mortgages meeting CFPB safety standards: limits on points/fees, no risky features, and a verified ability-to-repay analysis.
Non-QM (Non-Qualified Mortgage)
Mortgages that fall outside Qualified Mortgage rules — typically used for self-employed, foreign-national, or investor borrowers.
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