Under the Ability-to-Repay (ATR) rule, what is the primary purpose of the tangible net benefit requirement for refinance transactions?
Correct Answer
B) To protect borrowers from serial refinancing that provides no meaningful benefit
The tangible net benefit requirement under 12 CFR 1026.43(e)(3) is designed to protect borrowers from abusive lending practices, particularly serial refinancing that strips equity without providing meaningful benefit to the borrower.
Why This Is the Correct Answer
The tangible net benefit requirement under 12 CFR 1026.43(e)(3) is designed to protect borrowers from abusive lending practices, particularly serial refinancing that strips equity without providing meaningful benefit to the borrower.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
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Previous Question
A borrower's construction loan has a 12-month term, but construction is only 60% complete when the loan matures due to weather delays and permit issues. The borrower has been making interest-only payments on time. What typically happens next?
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When communicating with a borrower who has limited English proficiency, what is the MLO's primary obligation regarding disclosures?