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An MLO discovers that a borrower's credit score dropped significantly after loan approval but before closing. The borrower had qualified for standard PMI rates. What is the most appropriate action regarding PMI?

Correct Answer

B) Re-verify PMI eligibility and rates based on current credit score

PMI eligibility and pricing are based on current borrower qualifications at the time of closing. If credit scores change significantly, the MLO should re-verify PMI terms with the insurer, as the borrower may face higher PMI rates or potentially be denied coverage, which would affect loan approval.

Answer Options
A
Proceed with original PMI terms since approval was already granted
B
Re-verify PMI eligibility and rates based on current credit score
C
Cancel the loan since PMI is no longer available
D
Require the borrower to increase their down payment to 20%

Why This Is the Correct Answer

PMI eligibility and pricing are based on current borrower qualifications at the time of closing. If credit scores change significantly, the MLO should re-verify PMI terms with the insurer, as the borrower may face higher PMI rates or potentially be denied coverage, which would affect loan approval.

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