True or False: The ATR rule applies to all consumer mortgage loans that meet the definition of "covered transaction."

True or False: The ATR rule applies to all consumer mortgage loans that meet the definition of "covered transaction."

• A. True
• B. False
• C. Only for conventional loans
• D. Only for loans above a certain amount

Answer: (A)

The assertion is true: the Ability to Repay (ATR) rule is designed to apply to all consumer mortgage loans that meet the definition of a "covered transaction" under the Truth in Lending Act (TILA). This rule was established to ensure that lenders assess a borrower's ability to repay a mortgage loan before extending credit. The intention is to protect consumers from taking on loans they cannot afford, which was a significant factor in the financial crisis. By applying to all covered transactions, the ATR rule encompasses a wide range of mortgage loans, including both conventional loans and loans backed by government agencies. This comprehensive application helps promote responsible lending practices and consumer protection, making it a vital component of Regulation Z in the context of mortgage lending.

The assertion is true: the Ability to Repay (ATR) rule is designed to apply to all consumer mortgage loans that meet the definition of a "covered transaction" under the Truth in Lending Act (TILA). This rule was established to ensure that lenders assess a borrower's ability to repay a mortgage loan before extending credit. The intention is to protect consumers from taking on loans they cannot afford, which was a significant factor in the financial crisis.

By applying to all covered transactions, the ATR rule encompasses a wide range of mortgage loans, including both conventional loans and loans backed by government agencies. This comprehensive application helps promote responsible lending practices and consumer protection, making it a vital component of Regulation Z in the context of mortgage lending.