A renovation loan borrower discovers asbestos in walls that need to be removed for their kitchen remodel. The asbestos abatement will cost an additional $15,000 not included in the original loan amount. Which statement is most accurate?
Correct Answer
B) The borrower must halt construction until additional financing is secured for the abatement
Asbestos abatement is typically required by law before construction can proceed in affected areas. Since this represents an unforeseen cost not included in the original loan amount, the borrower must secure additional financing or pay cash before construction can continue in compliance with environmental regulations.
Why This Is the Correct Answer
Asbestos abatement is typically required by law before construction can proceed in affected areas. Since this represents an unforeseen cost not included in the original loan amount, the borrower must secure additional financing or pay cash before construction can continue in compliance with environmental regulations.
More Origination Questions
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For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
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:
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A borrower calls and provides verbal information about their income, debts, and down payment. Based on this information, the MLO tells them they could qualify for a $300,000 loan. This process is best described as: