Mortgage Loan Originator (MLO) Licensing Practice Test 2026 – Your All-in-One Guide to Exam Success!

The Ability to Repay (ATR) Rule, established under the Dodd-Frank Act, requires lenders to ensure that borrowers have the ability to repay their loans before extending credit for certain mortgage types. Open-end home equity plans, such as home equity lines of credit (HELOCs), are considered exceptions to the ATR Rule. This is because these types of loans are often structured to allow for regular access to credit, meaning the total borrowing amount can change based on how much the borrower decides to withdraw.

In contrast, conventional mortgages, fixed-rate mortgages, and variable-rate mortgages are typically subject to the ATR Rule, as they represent closed-end loans where a fixed amount is borrowed upfront, and the loan terms are clearly defined. The ATR Rule serves to prevent borrowers from obtaining mortgages they cannot afford, promoting responsible lending practices, which is particularly crucial for these types of loans where the repayment structure is straightforward.