Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
The Qualified Mortgage rule was created by the Dodd-Frank Act to protect borrowers from unaffordable loans and protect lenders from liability when they make loans that meet defined safe standards. Understanding the ATR rule, QM requirements, and safe harbor protections is essential for the NMLS exam.
- Ability-to-Repay (ATR) Rule
Before making any residential mortgage loan, lenders must make a reasonable and good-faith determination that the borrower has the ability to repay the loan.
The 8 ATR factors lenders must consider:
- Current or reasonably expected income or assets
- Current employment status
- Monthly mortgage payment
- Monthly payment on simultaneous loans
- Monthly payments for mortgage-related obligations — taxes, insurance, HOA
- Current debt obligations, alimony, and child support
- Monthly debt-to-income ratio
- Credit history