What Realtors® Need to Know About
Ability-to-Repay Mortgage Rules
Beginning January 10, 2014, the Consumer Finance Protection Bureau has created a mortgage lending rule called the “ABILITY-TO-REPAY.” (ATR)
In a nutshell, mortgage lenders must make a reasonable, good-faith judgment that a borrower has a “reasonable ability to repay the loan.”
There are eight ATR underwriting requirements on each loan that need to be considered:
1. Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the borrower will rely on to repay the loan
2. Current employment status (if relying on employment income when assessing the ability to repay)
3. Total monthly mortgage payment for this loan (for ARM loans, it’s the projected, highest payment possible)
4. Monthly payments on any simultaneous loans secured by the same property (such as a second mortgage)
5. Monthly payments for property taxes and insurance or homeowners association fees or special assessments
6. Debts, alimony, and child support obligations
7. Monthly debt-to-income ratios not to exceed 43%
8. Credit history of the borrower(s)
What does this really mean to you and your clients?
· Underwriting will be more strict
· More documentation will be required
· Pre-approvals become MORE important than ever before
· Re-verification of income, credit and assets will be required before closing.
Please let me assist you in your next real estate sale and help you and your buyer navigate through all the new rules to make sure they qualify!