In construction lending, what is the primary purpose of requiring a completion bond or performance bond?
Correct Answer
C) To protect against contractor default and ensure project completion
Completion or performance bonds protect the lender and borrower by ensuring that if the contractor defaults or fails to complete the project, the bonding company will either complete the work or compensate for the loss.
Why This Is the Correct Answer
Completion or performance bonds protect the lender and borrower by ensuring that if the contractor defaults or fails to complete the project, the bonding company will either complete the work or compensate for the loss.
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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