Ability to Repay
Definition - What does Ability to Repay mean?
The ability to repay refers to a regulation created by the Consumer Financial Protection Bureau that attempts to protect people buying homes from getting into debt that would not be financially reasonable for them. Essentially, the ability to repay regulation makes it criminal for a mortgage lender to provide a person with a loan before they look into whether that person can afford that loan.
Justipedia explains Ability to Repay
The Consumer Financial Protection Bureau began looking into creating a regulation such as this after the catastrophic effects of the underwater mortgage crisis that occurred in 2008. It is nearly universally agreed that this mortgage crisis was the cause of the economic depression the United States went through shortly thereafter. In the years leading to the underwater mortgage crisis there were many mortgage lenders who were offering loans to people without doing any research concerning whether they could afford those loans