A borrower with a 15% down payment on a conventional loan requests to pay their PMI premium annually rather than monthly. The lender agrees but requires the borrower to establish an escrow account. What is the primary regulatory concern with this arrangement?
Correct Answer
B) The lender cannot require escrow for annually paid PMI
Under RESPA, lenders cannot require borrowers to maintain escrow accounts for annually paid PMI premiums since the borrower is paying the premium directly to the insurer. The lender can offer escrow as an option but cannot mandate it for annual PMI payments.
Why This Is the Correct Answer
Under RESPA, lenders cannot require borrowers to maintain escrow accounts for annually paid PMI premiums since the borrower is paying the premium directly to the insurer. The lender can offer escrow as an option but cannot mandate it for annual PMI payments.
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An applicant's credit report shows a Chapter 7 bankruptcy discharge date of exactly 2 years ago, but also shows a mortgage foreclosure with a completion date of 6 months ago. Which waiting period applies?
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During the application process, a borrower mentions they are expecting a large bonus payment next month that would significantly improve their debt-to-income ratio. The borrower asks if they should wait to apply until after receiving the bonus. What should the MLO advise?