An MLO issues a pre-approval letter that states 'subject to satisfactory appraisal and final underwriting approval.' The borrower uses this letter to make an offer, but the appraisal comes in $15,000 below the purchase price. What is the lender's obligation?
Correct Answer
B) Require the borrower to make up the difference in cash or renegotiate the price
Pre-approval letters typically include conditions such as satisfactory appraisal. When the appraisal comes in below purchase price, it affects the loan-to-value ratio and collateral adequacy. The borrower must either provide additional down payment to maintain the LTV ratio or renegotiate the purchase price.
Why This Is the Correct Answer
Pre-approval letters typically include conditions such as satisfactory appraisal. When the appraisal comes in below purchase price, it affects the loan-to-value ratio and collateral adequacy. The borrower must either provide additional down payment to maintain the LTV ratio or renegotiate the purchase price.
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
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
Next Question
A borrower's financial situation has significantly improved since their initial loan application, making them eligible for better loan terms. The MLO's duty of good faith and fair dealing requires: