ATR/QM Rule: Requirements, QM Categories, and Safe Harbor

The ATR/QM rule is the federal mortgage regulation that requires lenders to verify you can actually repay a home loan before approving it, and creates a protected loan category — the Qualified Mortgage — that shields lenders from certain lawsuits when the loan meets stricter product and pricing standards. It sits at 15 U.S.C. § 1639c and 12 CFR 1026.43, and it has governed residential mortgage underwriting since Dodd-Frank took effect in 2010.¹

What the Ability-to-Repay Rule Requires

A lender has to make a reasonable, documented determination that you can repay the loan on its terms, including taxes and insurance. The regulation lists eight factors the lender must consider:²

Current or reasonably expected income or assets, excluding the value of the home being financed.
Current employment status, if the lender relies on employment income.
The monthly mortgage payment, calculated at the fully indexed rate rather than a temporary introductory rate.
Payments on any simultaneous loan the lender knows will be secured by the same property.
Property taxes, homeowner’s insurance, and association dues that will be part of the monthly housing obligation.
Other debts, including credit cards, car loans, student loans, alimony, and child support.
Debt-to-income ratio or residual income.
Credit history.

Your word isn’t enough for any of it. The numbers must be backed by third-party documentation such as pay stubs, tax returns, and credit reports.

What Makes a Loan a Qualified Mortgage

A Qualified Mortgage meets the ATR requirements plus restrictions on the loan’s structure. Under 12 CFR 1026.43(e)(2), a QM cannot have negative amortization, cannot include interest-only periods, and cannot require a balloon payment (with a narrow exception for certain small creditors in rural areas). The term is capped at 30 years.³ For adjustable-rate loans, the lender must qualify you using the maximum interest rate that could apply during the first five years, not the introductory rate. Income, assets, and debts must be verified with reliable third-party records before closing.²

There’s also a cap on the total points and fees a lender can charge at closing. Exceed it and the loan loses QM status no matter how clean everything else looks.

2026 Points and Fees Limits

The CFPB adjusts the dollar thresholds every January. For loans closing in 2026, a mortgage loses QM status if points and fees exceed:⁴

Loans of $137,958 or more: 3% of the total loan amount.
$82,775 to $137,957: $4,139.
$27,592 to $82,774: 5% of the total loan amount.
$17,245 to $27,591: $1,380.
Below $17,245: 8% of the total loan amount.

For most conventional home purchases, the 3% cap on loans at or above $137,958 is the number that matters.

Categories of Qualified Mortgages

Not every QM follows the same underwriting path. The regulation creates several categories for different corners of the lending market.

General QM

The most common category. The CFPB replaced the original 43% debt-to-income cap with a price-based test that compares the loan’s annual percentage rate to the average prime offer rate (APOR) for a similar transaction.⁵ For a standard first-lien mortgage, the maximum spread is 2.25 percentage points above APOR. Loans priced above that can’t be QMs at all.⁶

The practical effect is that a borrower with, say, a 45% DTI and strong compensating factors can still qualify, as long as the lender prices the loan conservatively enough to stay within the spread.

Small Creditor QM

Community banks and credit unions holding loans in their own portfolio get more flexibility. The institution’s total assets must be below $2.785 billion (the 2026 threshold), and it must not have sold more than 2,000 first-lien mortgages in the prior calendar year.⁷ These lenders may use different underwriting criteria, and in certain rural or underserved areas they can include balloon payment features that would disqualify a General QM.

Seasoned QM

A loan that doesn’t initially meet all QM standards can earn QM status if the originating lender or first purchaser holds it in portfolio for at least 36 months and the borrower maintains a clean payment record during that period.⁸ “Clean” means no more than two payments 30 days late and zero delinquencies of 60 days or more across the 36-month window.⁹

Government and Agency QMs

Loans insured or guaranteed by FHA, VA, or USDA, and loans eligible for purchase by Fannie Mae or Freddie Mac, follow their own QM definitions. They still have to meet the basic product feature restrictions — no negative amortization, no interest-only payments, term of 30 years or less — but the underwriting criteria can differ from the General QM price-based test.

Safe Harbor and Rebuttable Presumption

The legal payoff of issuing a QM is liability protection, and how much protection depends on how the loan is priced.

A QM with an APR within 1.5 percentage points of the APOR for a first-lien loan (or 3.5 points for a junior lien) earns safe harbor status. Safe harbor creates a conclusive presumption that the lender complied with ATR.⁶ A borrower who later defaults on a safe harbor loan has almost no path to successfully argue the lender never should have approved it. QM status itself can still be challenged, but once established, the ATR compliance question is settled.¹⁰

A QM priced between 1.5 and 2.25 percentage points above APOR for a first-lien loan gets a rebuttable presumption instead. The lender is still presumed to have followed the rules, but the borrower can rebut that presumption by showing they lacked sufficient residual income to cover basic living expenses at closing.¹⁰ Above 2.25 percentage points on a first lien, the loan isn’t a QM and the lender gets neither form of protection.

What You Can Do If a Lender Violated the Rule

The penalties are real. Under 15 U.S.C. § 1640(a)(4), a lender that fails to comply with ATR is liable for all finance charges and fees the borrower paid over the life of the loan, unless the lender proves the violation wasn’t material.¹¹ On a 30-year mortgage that can reach six figures in interest alone. A borrower can also recover actual damages, statutory damages between $400 and $4,000, plus attorney’s fees and court costs.

Timing matters. To bring an affirmative lawsuit, a borrower has three years from the date of the violation. But if the lender forecloses, the borrower can raise an ATR violation as a defense at any point in the life of the loan. Under 15 U.S.C. § 1640(k), the violation can be asserted as recoupment or setoff regardless of how many years have passed since closing.¹¹ That unlimited foreclosure defense is what gives the rule teeth, and it’s the reason most lenders prefer to originate QMs whenever possible.

Loans the Rule Doesn’t Cover

Several transaction types sit outside the ATR/QM framework entirely:¹²

Reverse mortgages, because they don’t require monthly payments.
Bridge loans with a term of 12 months or less.
The initial construction phase of a construction-to-permanent loan, if that phase is 12 months or less. The permanent financing phase is a separate transaction and is not exempt.
Home equity lines of credit, which are governed by a different section of Regulation Z.
Extensions of credit made through state or local Housing Finance Agency programs.
Loans primarily for business, commercial, or agricultural purposes, even if secured by a dwelling.
Timeshare loans, and loan modifications that don’t qualify as refinancings.

If your mortgage falls in one of these buckets, the ATR verification requirements and the QM legal protections don’t apply, and the analysis of your rights runs on different rules.

1
Office of the Law Revision Counsel. 15 USC 1639c – Minimum Standards for Residential Mortgage Loans
2
eCFR. 12 CFR 1026.43 – Minimum Standards for Transactions Secured by a Dwelling
3
Consumer Financial Protection Bureau. What Is a Qualified Mortgage?
4
Federal Register. Truth in Lending (Regulation Z) Annual Threshold Adjustments
5
Consumer Financial Protection Bureau. Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): General QM Loan Definition
6
Congress.gov. The Qualified Mortgage (QM) Rule and Recent Revisions
7
Federal Register. Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold
8
Consumer Financial Protection Bureau. Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): Seasoned QM Loan Definition
9
Consumer Financial Protection Bureau. Seasoned QM Loan Definition Final Rule
10
U.S. Department of Housing and Urban Development. HUD Releases Qualified Mortgage Definition
11
Office of the Law Revision Counsel. 15 USC 1640 – Civil Liability
12
Consumer Financial Protection Bureau. 12 CFR 1026.43 – Minimum Standards for Transactions Secured by a Dwelling