During a construction loan inspection, the lender discovers that the contractor has installed windows that do not meet the energy efficiency specifications outlined in the approved construction plans. The contractor claims the windows are 'equivalent quality.' What should the MLO advise?
Correct Answer
B) Require documentation proving the windows meet or exceed the original specifications before releasing the next draw
Construction loan draws are contingent upon work being completed according to approved plans and specifications. Any deviations must be properly documented and approved before funds are released to ensure the project maintains its intended value and compliance.
Why This Is the Correct Answer
Construction loan draws are contingent upon work being completed according to approved plans and specifications. Any deviations must be properly documented and approved before funds are released to ensure the project maintains its intended value and compliance.
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?
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A mortgage company's policy requires all appraisals to be reviewed by their chief appraiser before being sent to underwriting. During this review, the chief appraiser changes comparable sales selections. This practice is:
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During the application process, an MLO realizes that a borrower would qualify for a government program with better terms, but the MLO's company doesn't offer that program type. What does good faith require?