A lender wants to implement a compensation plan where MLOs receive higher pay for loans that result in higher yield spread premiums. This arrangement is:
Correct Answer
C) Prohibited under all circumstances
Compensation based on yield spread premiums or any loan terms is strictly prohibited under Dodd-Frank Section 1403, regardless of disclosure or licensing status. This type of compensation creates incentives for loan steering.
Why This Is the Correct Answer
Compensation based on yield spread premiums or any loan terms is strictly prohibited under Dodd-Frank Section 1403, regardless of disclosure or licensing status. This type of compensation creates incentives for loan steering.
More Origination Questions
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
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:
A borrower requests that all loan communications be sent only to their workplace address because they are in the process of divorce and don't want their spouse to see mortgage-related documents. How should the MLO handle this request?
A borrower wants to compare an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. What is the MOST important disclosure the MLO must provide about the ARM?
An MLO provides pre-qualification based on a borrower's current employment but learns the borrower is starting a new job next month with a $10,000 salary increase. How should this information be handled?
An MLO issues a pre-approval letter that states 'subject to satisfactory appraisal and final underwriting approval.' The borrower uses this letter to make an offer, but the appraisal comes in $15,000 below the purchase price. What is the lender's obligation?
A borrower's bank statement shows monthly service fees of $25 and overdraft fees totaling $150 over two months. How should the MLO address this in the loan evaluation?
How long is a typical pre-approval letter valid?
During the application process, an MLO realizes that a borrower would qualify for a government program with better terms, but the MLO's company doesn't offer that program type. What does good faith require?
An MLO issues a pre-approval letter valid for 90 days. On day 85, the borrower's credit score drops 40 points due to a new credit inquiry and increased credit utilization. What should the MLO do?
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Previous Question
An MLO works for a credit union that is exempt from many Dodd-Frank compensation restrictions. The credit union pays the MLO a commission that varies based on whether the loan has an interest rate above or below the credit union's standard rate. This practice is:
Next Question
An MLO is comparing loan products for a borrower and notices that Lender A's APR is 4.25% while Lender B's APR is 4.18%, but Lender A's interest rate is lower. What most likely explains this discrepancy?