A borrower has a current mortgage balance of $150,000 and wants to refinance to a new loan of $175,000. After paying off the existing mortgage and closing costs of $3,000, they will receive $22,000 in cash. What is the primary regulatory concern with this transaction?
Correct Answer
B) It must be classified and disclosed as a cash-out refinance
Under TRID and other regulations, this transaction must be properly classified and disclosed as a cash-out refinance because the borrower is receiving significant cash proceeds. Cash-out refinances have different disclosure requirements, pricing, and risk characteristics compared to rate and term refinances.
Why This Is the Correct Answer
Under TRID and other regulations, this transaction must be properly classified and disclosed as a cash-out refinance because the borrower is receiving significant cash proceeds. Cash-out refinances have different disclosure requirements, pricing, and risk characteristics compared to rate and term refinances.
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