Ability To Repay

Categories: Finance,

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 street reform 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.