A borrower qualifies for multiple loan products. The loan originator presents a 30-year fixed rate at 6.5% with $2,000 in points, a 30-year fixed rate at 7.0% with $500 in points, and a 5/1 ARM at 5.5% with $1,500 in points. Which category does the 5/1 ARM represent?
Correct Answer
A) Loan with the lowest interest rate
The 5/1 ARM at 5.5% has the lowest interest rate among the three options presented. While it has an adjustable rate feature, it still represents the lowest rate category. The anti-steering rule requires presenting the lowest rate option even if it contains features that might be considered risky.
Why This Is the Correct Answer
The 5/1 ARM at 5.5% has the lowest interest rate among the three options presented. While it has an adjustable rate feature, it still represents the lowest rate category. The anti-steering rule requires presenting the lowest rate option even if it contains features that might be considered risky.
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