Under the Dodd-Frank Act, which of the following compensation arrangements for mortgage loan originators is prohibited?
Correct Answer
B) Commission based on the interest rate or other loan terms
Section 1403 of the Dodd-Frank Act prohibits compensation to loan originators based on the terms of the loan, including interest rate, points, or other loan terms. This prevents steering borrowers to higher-cost loans for increased compensation.
Why This Is the Correct Answer
Section 1403 of the Dodd-Frank Act prohibits compensation to loan originators based on the terms of the loan, including interest rate, points, or other loan terms. This prevents steering borrowers to higher-cost loans for increased compensation.
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?
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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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A property appraisal reveals the value is $50,000 less than the borrower's estimated value provided at application. The loan-to-value ratio changes from 80% to 85%, requiring mortgage insurance. This constitutes:
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