What is the scope of the ability to repay under Reg B?

The ability to repay under Regulation B encompasses all closed-end consumer credit transactions that are secured by a dwelling. This regulation aims to ensure that lenders assess a borrower's capacity to repay a loan before extending credit, thus protecting consumers from taking on debt they cannot afford.

When it comes to closed-end consumer credit transactions secured by a dwelling, these typically include mortgages and other loans where the borrower uses their residential property as collateral. This requirement supports responsible lending practices by helping to prevent defaults and foreclosures that can arise if borrowers are not adequately assessed for their repayment abilities.

The focus of Regulation B is on protecting consumers across the spectrum of residential lending, which is why it specifically applies to loans that are secured by a dwelling. This regulation is fundamental in establishing the framework for analyzing a borrower’s financial situation and ultimately determining their ability to fulfill loan obligations.