Ability to Repay

Date Recorded: July 24, 2024
Presenter: Kylee Durbin, Manager, Forvis Mazars, LLP

A two-hour webinar on an overview of the rules, including payment and APR/APOR testing, and a discussion of construction loans with an initial term greater than one year.

Underwriting – an institution’s procedures to try to determine whether the applicant will have the ability to repay the loan – is fundamental to the loan application process. Simply, institutions just want their money back. The process that an institution uses to make this determination is therefore critical, based on a risk analysis by, and for, the institution for each type of loan (i.e., safety and soundness considerations).

Nevertheless, underwriting for consumer mortgage loans is subject to compliance requirements under the Truth-in-Lending Act, as implemented by Regulation Z. These provisions are referred to as Ability-to-Repay / Qualified Mortgage rules. These federal lending compliance regulations provide for certain basic underwriting requirements and options that financial institutions must follow for mortgage loans, including Qualified Mortgages. Small creditors have additional options available to them.

Understanding the rule’s obligations, including revisions, is fundamental in establishing and understanding a creditor’s comprehensive underwriting program. Among other areas, the coverage of the rules, the calculation of the payments, and the importance of APR/APOR testing are potential areas of concern. 

HERE IS WHAT YOU WILL LEARN:

• When a loan is subject to the ATR requirements
  • Applicability to construction loans
• Compliance options, including the various qualified mortgages
  • Payment calculations
  • Price testing
• QM revisions