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When a financial institution makes a good-faith determination, the information must be verified by reliable sources by the financial institution.\u00a0<\/b><\/p>
This may include third parties with consistent and reliable reporting systems. Following the standard underwriting requirements for ATR policies will help the lenders to ensure that the borrower has the funds to repay the loan.<\/b><\/p>
The assessment is based on at least eight factors, including expected or reasonable current income or assets, latest employment status and verified income, loan repayments, other loans on the same asset, an expense related to the current asset, other debts, a DTI, and credit. The financial institution may consider other measures if required.<\/b><\/p>
The QM \/ ATR rules operate on legal confirmation that the issuers behind the qualified mortgage have complied with the requirements of the ability to repay rule. Therefore, it is assumed that the lender’s loan is legal.\u00a0<\/b><\/p>
Compliance with pricing and margin laws provides the lender with a conclusive presumption.<\/b><\/p>
This acts as a legal defense for lenders if the borrower decides to file a lawsuit. In particular, it gives them some cover if consumers accuse them of not making the right good-faith determination.<\/b><\/p>
While this gives the lender less leverage, it also protects the borrower. Non-QMM loans with high-interest rates do not benefit from this security.\u00a0<\/b><\/p>
Instead, QMs whose values are above a certain threshold come to the point of convergence.\u00a0<\/b><\/p>
This gives a borrower a strong argument that the borrower did not comply with the ATR criteria before providing the loan.<\/b><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t