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