An MLO is processing a refinance for a borrower who currently has an interest-only loan. The new loan will be a fully amortizing loan with a higher monthly payment but lower interest rate. Which factor is MOST important for establishing tangible net benefit?
Correct Answer
C) The elimination of the interest-only feature and principal reduction benefit
When refinancing from an interest-only loan to a fully amortizing loan, the tangible net benefit can be established through the elimination of negative amortization risk and the benefit of principal reduction, even if payments increase.
Why This Is the Correct Answer
When refinancing from an interest-only loan to a fully amortizing loan, the tangible net benefit can be established through the elimination of negative amortization risk and the benefit of principal reduction, even if payments increase.
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 $50,000 in a joint account with their spouse who is not on the mortgage application. What documentation is typically required to use these funds?
Next Question
A borrower receives W-2 income from their primary job and also operates a side business as a sole proprietorship that has shown losses for the past two years. When calculating qualifying income, the MLO should: