An MLO is completing an application for a borrower whose income is difficult to document because she is self-employed with variable income. Under the Ability-to-Repay rule, what is the lender's obligation?

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The lender must make a reasonable, good-faith determination of the borrower's ability to repay using verifiable information The ATR Rule under Regulation Z requires lenders to make a reasonable, good-faith determination of a borrower's ability to repay using verifiable information — regardless of whether income documentation is straightforward. Variable or self-employment income does not exempt a lender from this obligation; lenders must use reliable third-party documents (e.g., tax returns, bank statements). Stated income alone is insufficient. A loan cannot be a Qualified Mortgage simply by skipping ATR; QM status requires compliance with ATR.

An MLO is completing an application for a borrower whose income is difficult to document because she is self-employed with variable income. Under the Ability-to-Repay rule, what is the lender's obligation?

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