A Texas lender approves 14 high-cost loans in 2026 on equity alone, without looking at income or obligations. Does this pattern comply with the high-cost repayment-ability requirement?
Correct Answer
A) Prohibited: a pattern of lending on collateral without repayment ability
A lender may not engage in a pattern or practice of extending high-cost home loans based on the consumer collateral without regard to the obligor repayment ability, including current and expected income, current obligations, employment status and other financial resources apart from equity in the dwelling. Other choices: equity above 40% is the collateral the section tells the lender to look past; pricing for risk does not substitute for underwriting; and a default is not an element. Source: Tex. Fin. Code sec. 343.204(b)
Why This Is the Correct Answer
A lender may not engage in a pattern or practice of extending high-cost home loans based on the consumer collateral without regard to the obligor repayment ability, including current and expected income, current obligations, employment status and other financial resources apart from equity in the dwelling. Other choices: equity above 40% is the collateral the section tells the lender to look past; pricing for risk does not substitute for underwriting; and a default is not an element. Source: Tex. Fin. Code sec. 343.204(b)
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