NMLS MLO Exam With Confidence Using Practice Dumps

When an MLO suspects that a borrower, such as the mother in this case, may be under duress or being coerced into a transaction, they have a duty to ensure that all parties are willingly participating. The ethical approach would be to ask to speak privately with the mother to verify her intentions and comfort level with the transaction. This ensures that the loan is compliant with consumer protection laws such as the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA), which protect against unfair lending practices.

Ignoring the situation (Option B) could lead to participation in a coerced or fraudulent transaction.

Suggesting that the son be a co-borrower (Option C) or signing a power of attorney (Option D) are inappropriate if the mother is unwilling to proceed.

Verifying her willingness safeguards the integrity of the loan process and ensures compliance with fair lending practices.

References:

Truth in Lending Act (TILA)

Equal Credit Opportunity Act (ECOA)

CFPB guidelines on elder financial abuse

If a mortgage loan includes a prepayment penalty, it must be disclosed on both the Loan Estimate (LE) and the Closing Disclosure (CD). These disclosures, mandated under the TILA-RESPA Integrated Disclosure (TRID) rule, ensure that borrowers are aware of any penalties they may face for paying off the loan early. The prepayment penalty must be clearly stated to comply with TILA (Truth in Lending Act) requirements.

The Loan Estimate provides an early overview of loan terms, and the Closing Disclosure finalizes those terms.

References:

TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.38

CFPB Guidelines on prepayment penalties

For subprime mortgages, the credit score of the applicants is a primary factor in determining the interest rate. Subprime loans are designed for borrowers with lower credit scores, typically below 620, and are offered at higher interest rates due to the increased risk of default.

Factors like the loan term (A), property location (B), and sales price (C) may influence other aspects of the loan, but the credit score is the key factor that determines whether a borrower qualifies for a subprime mortgage and the corresponding interest rate.

References:

Fannie Mae and Freddie Mac Subprime Lending Guidelines

CFPB Subprime Mortgage Standards