A borrower's Loan Estimate shows an interest rate of 4.5%, but due to market changes, the MLO knows the rate will likely be 4.75% by closing. The borrower asks if the rate on the LE is guaranteed. What should the MLO explain?
Correct Answer
B) The rate shown is an estimate and may change; rate locks are separate from the Loan Estimate
Under TRID regulations, the Loan Estimate provides estimated terms, not guaranteed terms. Interest rates shown on the LE are estimates based on information available at the time of preparation. Rate locks are separate agreements that may or may not be in place. The MLO must clearly communicate that the LE contains estimates and explain the difference between estimated terms and any rate lock agreements that may be available.
Why This Is the Correct Answer
Under TRID regulations, the Loan Estimate provides estimated terms, not guaranteed terms. Interest rates shown on the LE are estimates based on information available at the time of preparation. Rate locks are separate agreements that may or may not be in place. The MLO must clearly communicate that the LE contains estimates and explain the difference between estimated terms and any rate lock agreements that may be available.
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