What is the main risk lenders mitigate by requiring ATR?

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The key idea is the borrower's ability to repay. Requiring ATR means lenders verify the borrower has enough income and assets to cover the loan payments given their debts and obligations. By confirming affordability, lenders reduce the chance that the borrower will default or end up in foreclosure because they can’t meet the payments. This involves assessing income, employment stability, other debts, and assets, often using a debt-to-income calculation to ensure payments fit the borrower's financial situation. The other options address collateral valuation, closing fraud, or market-driven declines in property value, which ATR doesn’t directly tackle; ATR targets the borrower’s capacity to repay rather than these other risks.