A mortgage company implements a 'quality bonus' system where MLOs receive additional compensation if their loans have fewer than 2 conditions at underwriting. The bonus amount is the same regardless of loan size or type. This compensation structure:
Correct Answer
B) Is permitted because it encourages loan quality without being based on loan terms
Dodd-Frank permits MLO compensation based on factors that promote loan quality and performance, such as fewer underwriting conditions, as long as the compensation is not tied to specific loan terms like interest rate, points, or fees.
Why This Is the Correct Answer
Dodd-Frank permits MLO compensation based on factors that promote loan quality and performance, such as fewer underwriting conditions, as long as the compensation is not tied to specific loan terms like interest rate, points, or fees.
More Origination Questions
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Previous Question
A mortgage broker discovers that an appraiser they frequently use has been providing consistently high valuations that help deals close. The broker never directly instructs the appraiser on value but continues to use this appraiser exclusively. Under AIR, this practice is:
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A borrower receives a Loan Estimate on Monday. On Thursday, the property appraisal reveals significant foundation issues requiring $15,000 in repairs. When must the lender provide a revised Loan Estimate if this affects the loan terms?