If a lender does not verify the borrower’s income or employment status “at or before” consummation of the loan, the lender has violated the Truth in Lending Act. If the lender or a subsequent purchaser of the mortgage loans files a foreclosure action, the borrower may assert the lender’s failure under the ATR rules as a defense to the foreclosure action. In addition, the lender would be subject to statutory damages of up to three years of the borrower’s finance charges, fees, and attorney costs.

For resources related to our guidance, please see:

• 15 USC 1640(a) (the failure to comply with the ATR rule may result in the creditor being liable to the borrower to an amount equal to the sum of all finance charges and fees paid by the consumer, unless the creditor can demonstrate that the failure to comply is “not material.”)
• 15 USC 1640(k) (defense to foreclosure)