A borrower has a rate lock that includes a float-down provision. Rates decrease by 0.75% during the lock period. The float-down provision allows the borrower to capture rate decreases greater than 0.25% for a fee of $500. What should the MLO advise?
Correct Answer
B) The borrower should exercise the float-down option to capture the lower rate
Since rates dropped 0.75% (exceeding the 0.25% threshold), the borrower can exercise the float-down option. The MLO should help the borrower calculate whether the $500 fee is worthwhile compared to the monthly payment savings from the 0.75% rate reduction.
Why This Is the Correct Answer
Since rates dropped 0.75% (exceeding the 0.25% threshold), the borrower can exercise the float-down option. The MLO should help the borrower calculate whether the $500 fee is worthwhile compared to the monthly payment savings from the 0.75% rate reduction.
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