Finance
The 'Ability-to-Repay' (ATR) rule under the Dodd-Frank Act requires lenders to:
AOnly lend to borrowers with credit scores above 700
BMake a good-faith determination that the borrower has the financial ability to repay the loan before approving it✓ Correct
CGuarantee the loan for the first 5 years
DLimit all mortgage originations to 30-year fixed-rate products
Explanation
The ATR rule requires mortgage lenders to make a reasonable, good-faith determination that the borrower has the ability to repay the loan based on income, assets, employment status, credit history, and other financial factors. It prevents the issuance of unaffordable loans that lead to default.
People Also Study
Related Alaska Questions
- An Alaska property sells for $500,000. The buyer gets a loan for $400,000. The lender requires an appraisal. The appraiser values the property at $480,000. What is the maximum loan the lender will approve at 80% LTV based on appraised value?Finance
- Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application?Finance
- In Alaska, the Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on:Finance
- Which federal law prohibits lenders from requiring a borrower to use a specific title company or settlement service provider as a condition of the loan?Finance
- An Alaska property manager who requires all tenants to provide the same documents (lease application, credit authorization, income verification) and uses the same scoring criteria for all applicants is:Fair Housing
Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Promissory NoteA written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
Study This Topic
Practice More Alaska Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alaska Quiz →