What is ‘Ability To Repay’
An individual’s financial capacity to make good on a debt. Specifically, the phrase “ability to repay” was used in the
Explaining ‘Ability To Repay’
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.
Further Reading
- The Consumer Financial Protection Bureau's Ability-to-Repay/Qualified Mortgage Rule – www.jstor.org [PDF]
- Why the Ability-to-Repay Rule Is Vital to Financial Stability – heinonline.org [PDF]
- How Sensitive is the Farm Sector's Ability to Repay Debt to Rising Interest Rates? – www.jstor.org [PDF]
- Financing vs. forgiving a debt overhang – www.nber.org [PDF]
- Financial Vergangenheitsbewältigung: the 1953 London debt agreement – papers.ssrn.com [PDF]
- The financial instability hypothesis – papers.ssrn.com [PDF]
- Paying for a law degree: Trends in student borrowing and the ability to repay debt – heinonline.org [PDF]
- Minsky's theory of financial crises in a global context – www.tandfonline.com [PDF]
