An MLO discovers that a borrower's income documentation contains a mathematical error that overstates their qualifying income by $500 per month after the loan has been submitted for underwriting. What is the MLO's obligation under good faith and fair dealing principles?
Correct Answer
B) Immediately notify the lender and borrower of the error and provide corrected documentation
Under good faith and fair dealing obligations, MLOs must immediately correct any known errors in loan documentation, regardless of size. Failing to disclose known material information violates the duty of good faith and could constitute fraud.
Why This Is the Correct Answer
Under good faith and fair dealing obligations, MLOs must immediately correct any known errors in loan documentation, regardless of size. Failing to disclose known material information violates the duty of good faith and could constitute fraud.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
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:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
People Also Study
Federal Mortgage-Related Laws
23% of exam
General Mortgage Knowledge
23% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Previous Question
A borrower has a bankruptcy discharge that occurred 30 months ago and has since established new credit with timely payments. For a conventional loan, what is the typical waiting period after bankruptcy discharge?
Next Question
Under the TRID rule, when must a lender provide the Loan Estimate to a borrower?