Under Dodd-Frank, a mortgage lender is prohibited from paying an MLO compensation that is based on:
Correct Answer
C) The prepayment penalty included in the loan
Prepayment penalties are loan terms, and compensation based on any loan terms is prohibited under Dodd-Frank Section 1403. Compensation based on loan count, volume, and experience are all permitted as they don't relate to specific loan terms.
Why This Is the Correct Answer
Prepayment penalties are loan terms, and compensation based on any loan terms is prohibited under Dodd-Frank Section 1403. Compensation based on loan count, volume, and experience are all permitted as they don't relate to specific loan terms.
More Origination Questions
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A borrower receives a Loan Estimate on January 5th. On January 12th, the lender discovers the borrower has an additional property not disclosed on the application. The lender provides a revised Loan Estimate on January 16th. Is this timing compliant?
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Which scenario represents a permissible compensation arrangement under Dodd-Frank?