Please
Review the below Case Study and Answer the following question in the Comments
Section Below:
Dave has been a licensed MLO
working for a lender called Liberty Loans for about a year now. And, over that
time, Dave has been steadily locking down his own methods for closing loans.
Let’s look at one of his
latest transactions as an example.
A borrower named Martha comes
to Dave for a mortgage loan. She was referred to him by her real estate agent
Patricia — whom Dave has worked with quite a few times.
Like many others in the world
today, Martha is trying to get back on her feet financially, and she is
succeeding. She went back to school and got a degree in graphic design, and has
already amassed a steady stream of freelance clients. She sets her own hours,
and can take vacations when she wants to, all while pulling down around $70,000
per year after taxes.
Martha’s credit rating is
still in a bit of a shambles, though, because of her spendthrift ex-husband,
who tended to perpetually outpace their income with his huge purchases. Now,
the divorce is final, but the shadow of his bad decisions still looms large
over her credit score.
Nevertheless, Martha thinks
it’s time to start a new life. She has downsized from the extravagances that
her husband indulged in. She has money coming in, and has saved a small down
payment. She wants to jump while the real estate market still somewhat favors
buyers.
Dave interviews her and takes
her information and they fill out the application. Martha needs a loan that
will conform to her income stream, which tends to be at its strongest from
January through May, and then again from late September through the end of the
year. Dave understands and says they have loan products that will fit the bill.
After talking over her whole
situation for a while, Dave tells Martha that, in all likelihood, she will have
to settle for a high-cost home loan, given her financial woes. And, although he
has not had much experience with high-cost home loans, Dave assures Martha that
such loans are very manageable and that they will find a way to help her get
the loan she needs. They fill out the Tangible Net Benefit Disclosure form, and
Dave sends Martha on her way.
Sure enough, when the
paperwork comes back, Dave finds that Martha has qualified for a high cost
loan.
At first, Martha is a little
worried about the loan. But when Dave goes over the numbers with her, she sees
that she can make the payments if she skimps on a few luxuries like dining out
and entertainment. In fact, it looks like the mortgage payment will come in
right at fifty percent (50%) of her total income after other obligations – and
that’s even with the triple-sized payments in her peak months!
Plus, Martha feels like she
might be coming out of this financial funk within the next year or two, and
Dave tells her they can always revisit the loan then to see if a refinance will
work for her. It seems like a good leap for Martha to take, so she does.
Martha is finally approved
then for a two hundred thirty-seven thousand dollar ($237,500) loan, with a
twelve thousand five hundred dollar ($12,500) down payment – which is right at
five percent (5%) of the two hundred fifty thousand dollar ($250,000) purchase
price of her new home.
Three years later, seeing
that the typical interest rate has dropped to about three and a half percent
(3.5%), Dave contacts Martha about possibly refinancing her mortgage.
Dave likes to keep in contact
with borrowers, just to keep his name in their minds if they or any of their
friends or family members ever need his services. So, he knows that Martha’s
financial situation has improved dramatically since she originally came to him
looking for a mortgage loan. She now has her own small firm and is making a
significantly better income that she was back then. But, everybody wants to
save a few bucks on their mortgage payment, right?
After two weeks of phone tag,
in which Dave lets Martha know that the rate could swing back up, she finally
decides to come in and talk about a refinance. And, sure enough, by the time
Martha gets in to Dave’s office, the rate isn’t quite as good as it was when he
originally contacted her – three point seven five percent (3.75%). Even so,
after running the numbers, Dave finds that Martha will still save $85 per month
on her mortgage payment with the refi! So, Martha applies to refinance her
mortgage, complete with another interview and Tangible Net Benefit Disclosure
form, and is approved.
Dave sends Martha the
Tangible Net Benefit Disclosure four (4) days later, and she closes a week
later.
1. Did Dave have any mishaps regarding the Tangible Net Benefit Disclosure during the refinance?
A. No, he sent her the necessary copy within 3 days after receiving the application
B. Yes, he should have given Martha a copy right there at the time she applied for the refinance
C. Yes, he did not get the copy sent to Martha within 3 days after receiving her loan application
2. What did Dave completely forget to do during the original loan application and the refinance?
A. He didn’t have her fill out the Tangible Net Benefit Disclosure Form
B. He didn’t have Martha lay out the purpose or reason for a purchase or refinance transaction in writing
C. He didn’t interview Martha about her current and prospective income, including the income’s source and likelihood that it will continue
3. Did the refinance of Martha’s loan actually provide her a tangible net benefit?
A. Yes, because it lowered her payment by $85 every month
B. Yes, because it helped her avoid foreclosure
C. No, Martha received no benefit from the refinance
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