A Georgia review asks whether a high-cost refinance is unfair loan flipping. Which fact pattern is risky?
Correct Answer
D) Refinancing a recent high-cost home loan without reasonable tangible net benefit can be unfair flipping.
Georgia Fair Lending Act flipping is the unfair practice of consummating a high-cost home loan that refinances an existing home loan consummated within the prior 5 years when the new loan does not provide a reasonable tangible net benefit to the borrower.
Why This Is the Correct Answer
The correct response is "Refinancing a recent high-cost home loan without reasonable tangible net benefit can be unfair flipping." because Georgia Fair Lending Act flipping is the unfair practice of consummating a high-cost home loan that refinances an existing home loan consummated within the prior 5 years when the new loan does not provide a reasonable tangible net benefit to the borrower.
Why the Other Options Are Wrong
Option A: Every refinance within five years is prohibited even when it benefits the borrower.
Every refinance within five years is prohibited even when it benefits the borrower. is not correct because it does not match the state-specific rule tested by the question.
Option B: Flipping rules apply only when the borrower receives cash at closing.
Flipping rules apply only when the borrower receives cash at closing. is not correct because it does not match the state-specific rule tested by the question.
Option C: A high-cost refinance is allowed whenever the new payment is initially lower.
A high-cost refinance is allowed whenever the new payment is initially lower. is not correct because it does not match the state-specific rule tested by the question.
Memory Technique
State rule questions: identify the state, isolate the condition, then eliminate answers that overgeneralize the rule.
Exam Tip
On state-law items, look for the answer that applies the state-specific condition instead of a broad licensing shortcut.
Common Mistakes to Avoid
- -Choosing an answer that sounds generally compliant but omits the state-specific condition
- -Treating experience, company licensing, or borrower consent as a substitute for the state rule
- -Missing limiting words such as only, generally, eligible, or statutory
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