An MLO's employment contract includes a provision that their commission rate will decrease by 0.1% for every loan that is rejected by underwriting in a given month. This compensation structure:
Correct Answer
B) Violates Dodd-Frank because it could encourage steering to easier-to-approve loan products
This compensation structure could incentivize an MLO to steer borrowers toward loan products that are more likely to be approved rather than finding the best loan for the borrower's situation, which violates the anti-steering provisions of Dodd-Frank.
Why This Is the Correct Answer
This compensation structure could incentivize an MLO to steer borrowers toward loan products that are more likely to be approved rather than finding the best loan for the borrower's situation, which violates the anti-steering provisions of Dodd-Frank.
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?
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An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
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