Mortgage Loan Originator (MLO) Licensing Practice Test 2025 – Your All-in-One Guide to Exam Success!

The ATR (Ability to Repay) regulation primarily applies to loans that are characterized as "qualified mortgages." This regulation is designed to ensure that borrowers have the ability to repay the loans they take on. It places specific requirements on lenders concerning the assessment of a borrower's financial situation and the capacity to repay the loan over its term.

Investment home purchases fall under the category of conventional loans and are subject to the ATR requirements, as they typically involve a traditional underwriting process where the lender must determine the borrower’s ability to repay. This means analyzing income, credit history, assets, and other financial factors to ensure that the borrower can meet their payment obligations.

In contrast, other options, such as equity lines of credit, reverse mortgages, and construction loans, may be less strictly regulated under ATR guidelines. For instance, home equity lines of credit can be subject to different standards since they allow for revolving credit, while reverse mortgages have unique repayment structures that may not fall under traditional ATR assessments. Construction loans often involve more complex arrangements that do not always require the same level of borrower qualification as standard home purchases.

Hence, because investment home purchases generally require lenders to adhere to the ATR regulation, they are the correct focus regarding this question about the scope of the ATR rules.