Ability To Repay
An individual's financial capacity to make good on a debt. Specifically, the phrase "ability to repay" was used in the
2010 Dodd-Frank Wall StreetReform and Consumer Protection Act in Title XIV, the Mortgage Reform and Anti-Predatory Lending Act, to describe the requirement that mortgage originators substantiate that potential borrowers can afford the mortgage they are applying for. Originators are required to look at a borrower's total current income and existing debt, for example, to make sure that the existing debt plus the potential mortgage debt, property taxes and required insurance do not exceed a stated percentage of the borrower's income.
The purpose of this legislation and the "ability to repay" standard was to prevent lenders from employing the same loose lending criteria used during the housing bubble of the mid-2000s, in which many people were allowed to take out mortgages they couldn't really afford, then lost their homes to foreclosure a few years later. Under the new laws, individuals who are not properly subjected to the ability to repay standard during the origination process may have a defense against foreclosure.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Debt capacity — Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases. The New York Times Financial Glossary * * * debt capacity ˈdebt caˌpacity noun [uncountable] FINANCE COMMERCE the possibility that a person… … Financial and business terms
debt capacity — Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases. Bloomberg Financial Dictionary * * * debt capacity ˈdebt caˌpacity noun [uncountable] FINANCE COMMERCE the possibility that a person or… … Financial and business terms
credit solvency — ability to pay off credit, ability to repay debts … English contemporary dictionary
credit worthiness — ability to repay on time credit that was extended … English contemporary dictionary
repayment power — ability to repay a loan … English contemporary dictionary
Dodd–Frank Wall Street Reform and Consumer Protection Act — Full title An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end too big to fail , to protect the American taxpayer by ending bailouts, to protect consumers… … Wikipedia
Moody's — Corporation Type Public Traded as NYSE: MCO Founded New York City (1909) … Wikipedia
Credit history — This article deals with the general concept of the term credit history. For detailed information about the same topic in the United States, see Credit score (United States). Credit history or credit report is, in many countries, a record of an… … Wikipedia
Dominion Bond Rating Service — DBRS is a credit rating agency headquartered in Toronto, Ontario. Founded in 1976 by its current owner and president, Walter Schroeder, it is the largest rating agency in Canada. It is one of ten Nationally Recognized Statistical Rating… … Wikipedia
debt — that which is owed. If you borrow money, buy something on credit or receive more money on an account than is owed, you have a debt. Glossary of Business Terms Funds owed by a debtor to a creditor. Outstanding debt obligations are assets for… … Financial and business terms