Friday, January 11, 2013

Ability to Repay Factors & Regulation Z Amendment Text

The Ability to Repay amendment will only become effective on January 10, 2014 so we have almost a year to prepare. Yet, its time to start studying as the entire mortgage industry has changed as a result of the Ability to Repay amendment to Regulation Z.

The Regulation's Text can be read by clicking here.

The Preamble's Text can be read by clicking here.

The regulation lays out 8 factors for a creditor to consider in making an Ability to Repay analysis, including:

  1. Current or reasonably expected income or assets; 
  2. Current employment status;
  3. The monthly payment on the covered transaction; 
  4. The monthly payment on any simultaneous loan; 
  5. The monthly payment for mortgage-related obligations; 
  6. Current debt obligations, alimony, and child support; 
  7. The monthly debt-to-income ratio or residual income; and 
  8. Credit history. 
Additionally, these factors must be verified by use of reasonably reliable third-party records. 

Further analysis of the Regulation will be available on this blog in the days and months to come.