This article consists of excerpts and other information from the Federal Register / Vol. 78.


During the years preceding the mortgage crisis, too many mortgages were made to consumers without regard to the consumer’s ability to repay the loans.  Loose underwriting practices by some creditors — including failure to verify the consumer’s income or debts and qualifying consumers for mortgages based on ‘‘teaser’’ interest rates that would cause monthly payments to jump to unaffordable levels after the first few years — contributed to a mortgage crisis that led to the nation’s most serious recession since the Great Depression.  In response to this crisis, in 2008 the Federal Reserve Board (Board) adopted a rule under the Truth in Lending Act which prohibits creditors from making "higher-price mortgage loans" without assessing consumers' ability to repay the loans.  Under the Board’s rule, a creditor is presumed to have complied with the ability-to-repay requirements if the creditor follows certain specified underwriting practices.  This rule has been in effect since October 2009.

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