Which aspect of mortgage origination does the Ability to Repay (ATR) rule address?

The Ability to Repay (ATR) rule specifically focuses on the assessment of a borrower's capacity to repay a mortgage loan. This regulation was established under the Dodd-Frank Act to ensure that lenders thoroughly evaluate a borrower's financial situation, including income, credit history, and overall debt-to-income ratio, before extending credit. The goal is to prevent borrowers from being offered loans they cannot afford, which could lead to higher rates of default and foreclosures. By mandating this evaluation, the ATR rule promotes responsible lending and protects consumers from entering into harmful financial obligations. This emphasis on assessing repayment ability is central to the integrity of the mortgage origination process and is key to fostering a stable housing market.