Which of the following scenarios would most likely constitute loan flipping under federal predatory lending guidelines?
Correct Answer
B) Refinancing three times within 18 months with increasing loan amounts and fees each time
Loan flipping is characterized by frequent refinancing within short time periods that primarily benefits the lender through repeated fees rather than providing tangible benefits to the borrower. Three refinances within 18 months with increasing costs suggests predatory flipping. The other scenarios represent legitimate reasons for refinancing that provide clear borrower benefits.
Why This Is the Correct Answer
Loan flipping is characterized by frequent refinancing within short time periods that primarily benefits the lender through repeated fees rather than providing tangible benefits to the borrower. Three refinances within 18 months with increasing costs suggests predatory flipping. The other scenarios represent legitimate reasons for refinancing that provide clear borrower benefits.
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