Finance

In South Carolina, which regulatory change was introduced by the Dodd-Frank Act that affects mortgage origination?

AAll mortgages must have a 30-year fixed term

BLenders must verify a borrower's ability to repay (ATR rule) and Qualified Mortgage standards✓ Correct

CDown payments must be at least 20% for all loans

DGovernment must approve all mortgage rates

Explanation

The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires lenders to verify the borrower's ability to repay a mortgage. Loans meeting Qualified Mortgage (QM) standards receive a safe harbor from ATR liability.

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Key Terms to Know

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.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Promissory Note

A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.