A mortgage team asks a sponsorship reviewer about refinance benefit and repayment-ability review during an annual compliance meeting. Which answer should guide the file?
Correct Answer
B) Compare costs, term, payment, and risk features
Why this is correct: The governing concept for evaluating a refinance is the "net tangible benefit" to the borrower. This requires a comprehensive comparison of the old and new loan terms. The correct answer, "Compare costs, term, payment, and risk features," captures this holistic analysis, ensuring the refinance is in the borrower's interest by weighing upfront costs against long-term savings and changes in loan structure (e.g., moving from a fixed to an adjustable rate). Why the other choices are wrong: Using the lender compensation as evidence the refinance is in the borrower interest is wrong because lender gain does not equate to borrower benefit. Using the licensing standard to decide the TILA Ability to Repay issue before confirming the trigger facts is wrong because the analysis must be based on the specific loan facts, not a generic standard. Approving the refinance based only on a lower payment without reviewing costs and term changes is wrong because a lower payment achieved by extending the term or adding high costs may not provide a net benefit. Exam tip: A refinance must provide a demonstrable benefit; always compare all key loan terms.
Why This Is the Correct Answer
The correct response is "Compare costs, term, payment, and risk features" because Refinance recommendations should be evaluated for borrower benefit, repayment ability, and steering risk.
Why the Other Options Are Wrong
Option A: Use the lender compensation as evidence the refinance is in the borrower interest.
This choice is not the best answer because it applies the wrong file step for refinance benefit review; the governing rule is tested by the correct option.
Option C: Use the licensing standard to decide the TILA Ability to Repay issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Approve the refinance based only on a lower payment without reviewing costs and term changes.
This choice is a tempting shortcut, but it conflicts with refinance benefit review because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
refinance benefit and repayment-ability review: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For refinance benefit review questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Origination Questions
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