A borrower asks their MLO to structure a loan to avoid triggering certain disclosure requirements by keeping the loan amount just below regulatory thresholds. How should the MLO respond consistent with good faith obligations?
Correct Answer
B) Explain that loan structuring should be based on borrower needs, not regulatory avoidance
Good faith requires MLOs to structure loans based on legitimate borrower needs and ability to repay, not to circumvent regulatory protections. Deliberately avoiding disclosure requirements violates the spirit of consumer protection laws.
Why This Is the Correct Answer
Good faith requires MLOs to structure loans based on legitimate borrower needs and ability to repay, not to circumvent regulatory protections. Deliberately avoiding disclosure requirements violates the spirit of consumer protection laws.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
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An MLO presents three conventional loan options with different rate/point combinations, but fails to present any government loan options despite the borrower qualifying for FHA financing. The MLO's defense that 'the borrower seemed sophisticated and preferred conventional loans' would be: