A team member asks about Construction Loan Terms in a compliance desk review while trying to select the answer that fits the governing requirement. Which response should a disclosure specialist use?
Correct Answer
C) Consider both construction and permanent payment obligations
Construction and construction-to-permanent loans require correct phase treatment, disclosures, and repayment analysis. The best answer is "Consider both construction and permanent payment obligations".
Why This Is the Correct Answer
The correct response is "Consider both construction and permanent payment obligations" because Construction and construction-to-permanent loans require correct phase treatment, disclosures, and repayment analysis.
Why the Other Options Are Wrong
Option A: Release draws without inspection or completion evidence required by the program.
This choice is a tempting shortcut, but it conflicts with construction-loan controls because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option B: Treat a construction-to-permanent loan as ordinary purchase financing at every stage.
This choice is not the best answer because it applies the wrong file step for construction-loan controls; the governing rule is tested by the correct option.
Option D: Ignore builder approval because the borrower owns the land.
This choice is a tempting shortcut, but it conflicts with construction-loan controls because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
Construction Loan Terms: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For construction-loan controls 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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In a pricing desk question, the loan team sees facts tied to TRID Closing Disclosure Changes. What should the file reflect?
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