An appraisal comes back significantly higher than the contract price with no reasonable explanation. The loan officer should:
Correct Answer
B) Order a second appraisal and investigate the discrepancy
Under the Truth in Lending Act and Dodd-Frank regulations, lenders must ensure appraisal integrity. An unexplained significant difference between appraisal value and contract price is a red flag for appraisal fraud. The MLO must investigate and potentially order a second appraisal to ensure accuracy.
Why This Is the Correct Answer
Under the Truth in Lending Act and Dodd-Frank regulations, lenders must ensure appraisal integrity. An unexplained significant difference between appraisal value and contract price is a red flag for appraisal fraud. The MLO must investigate and potentially order a second appraisal to ensure accuracy.
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A lender's policy requires all self-employed borrowers to provide 3 years of tax returns instead of the standard 2 years. Data shows this affects 35% of Hispanic borrowers compared to 12% of white borrowers, as Hispanic borrowers are more likely to be self-employed in the lender's market area. The lender can document higher default rates among self-employed borrowers with only 2 years of documentation. This scenario represents:
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