If a borrower is denied a loan, which due process must the lender follow according to the ATR requirement?

The correct answer centers around the requirement for lenders to document the reasons for denial in writing, which is crucial for transparency and regulatory compliance under the Ability to Repay (ATR) requirements. When a borrower is denied a loan, the lender must provide a clear, written explanation of the reasons behind this decision. This not only helps the borrower understand the specific factors that led to the denial, but it also protects the lender by ensuring that they have duly followed legal protocols regarding loan originations and denials.

Providing this written documentation serves a dual purpose: it offers the borrower insight into their financial standing and illuminates any potential avenues for improvement should they wish to apply for a loan in the future. It also assures compliance with federal regulations that seek to ensure fairness and transparency in the lending process, thereby helping to foster trust between borrowers and lenders.