Ability to repay,

Definition of Ability to repay:

1. Under Dodd-Frank, the Consumer Financial Protection Bureau (CFPB) has jurisdiction to create new rules and regulations for the mortgage industry. According to these rules, the loan originators must look at a borrower's total current income and existing debt. They need to make sure that the existing debt plus the potential mortgage debt and related expenses do not exceed a stated percentage of the borrower's income.

2. The representation of the financial capacity of an individual or an institution to make good on their repayment of a debt or a loan. The ability to repay is considered by a lender when deciding whether to give a loan to an individual or an institution.

3. The ability to repay refers to an individual's financial capacity to make good on a debt. Specifically, the phrase "ability to repay" was used in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. It describes the requirement that mortgage originators substantiate that potential borrowers can afford the mortgage. This provision of Dodd-Frank is often called the ability to repay rule, and "ability to repay" is sometimes abbreviated ATR.

How to use Ability to repay in a sentence?

1. As of early 2020, the CFPB was planning to eliminate the debt-to-income requirements.
2. The ability to repay refers to an individual's financial capacity to make good on a debt.
3. Factors considered in the ability to repay include the borrower's income, assets, employment status, liabilities, credit history, and the debt-to-income (DTI) ratio.
4. The ability to repay rule is the part of the Dodd-Frank Act that restricts loans to borrowers who are likely to have difficulty repaying them.