Under ATR underwriting, lenders must do what before extending credit?

• A. Verify the borrower's identity
• B. Complete the loan within a week
• C. Assess and document the borrower's ability to repay
• D. Verify flood insurance requirements

Answer: (C)

The core idea here is that the lender must determine and document the borrower's ability to repay the loan before extending credit. This means carefully evaluating the borrower's income or assets, employment status, and all projected monthly obligations, including the loan’s payments, to ensure the borrower can meet the payments without undue hardship. The lender must not only perform this analysis but also keep documentation showing the conclusion reached and the factors considered. This focus on repayment ability is what ATR underwriting is all about and is what protects borrowers from loans they cannot afford. While verifying identity, timing the loan, or checking flood insurance are important in other contexts, they do not embody the ATR requirement in the same way.