Regulation Z’s Ability to Repay Rules: What’s Covered
Anytime you have a consumer-purpose, closed-end, dwelling-secured loan, there are potentially a lot of different compliance requirements that can come into play. One such requirement is the Ability to Repay rules found in Regulation Z. This requires lenders to make “a reasonable and good faith determination” of borrowers’ ability to repay a mortgage loan. Lenders must consider specific underwriting factors, use reasonably reliable third-party records to verify the information and retain documentation. There are, however, a lot of exceptions. For instance, the Ability of Repay rules do not apply to HELOCs, construction loans (12 months or less), or loan modifications.
Kevin explains the loan modification exemption in the video.
Published 2026/03/24
Kevin Edwards
Kevin brings years of experience and a unique perspective on regulatory matters to our clients. A self-proclaimed geek and accredited CRCM, Kevin is also a recovering attorney with experience as in-house counsel for a large regional bank and one of the leading national title insurance providers. For reasons unknown, Kevin decided to leave the safety and serenity of his desk job to seek fortune and glory as a wandering adventurer. Like a bank compliance version of Kwai Chang Caine, The Man with No Name or Don Quixote, he now travels the land seeking to help those in need and righting compliance wrongs, wherever he may find them. Kevin lives in Sioux Falls with his two children, who are surprisingly normal after having endured their father’s vivid imagination for their entire lives. He won’t admit to having any hobbies, because apparently “Regulations never sleep.” (While he does say this in his Batman voice, we’re pretty sure he’s joking.) From the looks of his Facebook page, he likes the outdoors and spending time with his large extended family (who seem like relatively normal people).