NMLS MLO Online Access

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

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

A salaried W-2 position is an example of non-fluctuating income because the borrower receives a consistent, fixed salary each pay period. This type of income is easy to verify and predict, making it ideal for mortgage qualification.

Other types of fluctuating income:

Self-employed income (B) and commission-based income (C) vary based on the nature of work and can fluctuate month to month.

Part-time work with irregular hours (D) also fluctuates due to varying work hours, making it inconsistent.

References:

Fannie Mae Selling Guide for income verification

Freddie Mac's Loan Product Advisor for employment income documentation

Prepaid charges refer to certain upfront costs paid at closing. These include:

Per diem interest (D), which covers the interest from the closing date to the end of the month.

Other items like origination fees (A), credit report fees (B), and conveyance taxes (C) are not considered prepaid charges; they are typically categorized as closing costs or settlement fees.

References:

Real Estate Settlement Procedures Act (RESPA)

TILA-RESPA Integrated Disclosures (TRID)