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Ethics & Fraudmedium18% of exam

An MLO realizes they made an error in calculating a borrower's qualifying income, resulting in approval for a loan amount higher than what the borrower can actually afford. The error is discovered after closing. What should the MLO do?

Correct Answer

D) Immediately disclose the error to the lender and work on potential solutions

MLOs have an ongoing fiduciary duty to address material errors that affect borrower welfare, even after closing. The SAFE Act requires MLOs to act with integrity and in the borrower's best interest. Immediate disclosure allows for potential remedial actions and demonstrates professional responsibility and ethical conduct.

Answer Options
A
Take no action since the loan has already closed and funded
B
Only disclose if the borrower specifically asks about their qualification
C
Wait to see if the borrower experiences payment difficulties before acting
D
Immediately disclose the error to the lender and work on potential solutions

Why This Is the Correct Answer

MLOs have an ongoing fiduciary duty to address material errors that affect borrower welfare, even after closing. The SAFE Act requires MLOs to act with integrity and in the borrower's best interest. Immediate disclosure allows for potential remedial actions and demonstrates professional responsibility and ethical conduct.

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