A borrower qualifies for a conventional loan at 4.5% interest and a government loan at 4.25% interest. Both loans have the same APR due to different fee structures. The MLO presents only the conventional loan because it generates higher compensation. This scenario represents:
Correct Answer
D) A steering violation since compensation influenced the loan selection
Under Regulation Z's anti-steering provisions, an MLO cannot steer a borrower away from a loan in a different category (conventional vs. government) based on compensation considerations, even if the APRs are the same. The MLO must present loans from each category for which the borrower qualifies.
Why This Is the Correct Answer
Under Regulation Z's anti-steering provisions, an MLO cannot steer a borrower away from a loan in a different category (conventional vs. government) based on compensation considerations, even if the APRs are the same. The MLO must present loans from each category for which the borrower qualifies.
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An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer: