A New York broker arranges a 2026 high-cost refinance that leaves the borrower no better off. How is a high-cost refinance without a tangible net benefit treated under the loan-flipping restriction?
Correct Answer
B) Loan flipping: a refinance without a tangible net benefit
No lender or mortgage broker making or arranging a high-cost home loan may engage in loan flipping, which is making a home loan that refinances an existing home loan when the new loan does not have a tangible net benefit to the borrower considering all of the circumstances, including the terms of both loans, the cost of the new loan and the borrower situation. Other choices: the test is the benefit rather than the choice; no frequency element appears; and a lower rate is one circumstance among all of them. Source: N.Y. Banking Law § 6-l(2)(i)
Why This Is the Correct Answer
No lender or mortgage broker making or arranging a high-cost home loan may engage in loan flipping, which is making a home loan that refinances an existing home loan when the new loan does not have a tangible net benefit to the borrower considering all of the circumstances, including the terms of both loans, the cost of the new loan and the borrower situation. Other choices: the test is the benefit rather than the choice; no frequency element appears; and a lower rate is one circumstance among all of them. Source: N.Y. Banking Law § 6-l(2)(i)
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