Final answer:
The act that establishes a borrower's ability to repay a mortgage is not cited, but the Dodd-Frank Act's Ability-to-Repay rule is a modern standard. Historically, the Home Owners' Loan Corporation Act helped with refinancing to avoid foreclosures, while banks consider mortgages as assets and estimate their present value based on what others in the market will pay for them.
Step-by-step explanation:
The act that establishes a borrower's ability to repay a mortgage is not specified in the information provided. However, the broader context of the question seems to refer to historical developments in the mortgage industry. Before changes in finance and banking laws in the 1990s and early 2000s, banks carefully vetted buyers for their ability to repay loans, particularly mortgages. Post these changes, the securitization of mortgage loans allowed lenders to sell these loans as bonds, thus separating the financial interests of the lender from the borrower's ability to repay. In such an environment, the ability to repay became less of a focus for lenders issuing loans. To understand the ability of borrowers to repay a mortgage loan in a contemporary context, one would look to regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, through the Ability-to-Repay rule and the Qualified Mortgage (QM) standards, direct lenders to assure a borrower's ability to repay before extending credit.
In the historical context provided for June 13, the Home Owners' Loan Corporation Act established the Home Owners' Loan Corporation, which helped Americans avoid foreclosure through refinancing. However, this act is not the same as a general regulatory framework establishing a borrower's ability to repay; it was a specific response to the economic conditions of the time. In terms of loans in the banking sector, a mortgage is considered an asset for a bank since the borrower is legally obliged to make payments. Banks can measure the value of a mortgage asset by estimating what another party in the market is willing to pay for it, reflecting on the standard of the primary and secondary loan markets where these assets are traded.