A mortgage broker negotiates a loan for a borrower at 6.5% interest and receives a yield spread premium from the lender. The borrower also pays the broker a $1,500 origination fee directly. Under the LO Comp Rule, this arrangement is:

Question

Accepted Answer

Prohibited because the broker is receiving compensation from both the lender and the borrower The LO Compensation Rule under Regulation Z (12 CFR 1026.36(d)(2)) prohibits a loan originator from receiving compensation from both the consumer and any other person (such as the lender via a yield spread premium) in connection with the same transaction. This is the dual compensation prohibition. "Prohibited only if the loan is a high-cost mortgage..." is incorrect because there is no 3% exception to the dual compensation prohibition. "Permissible if the borrower signed a written consent..." is incorrect because no written consent can override this prohibition. "Permissible because the total compensation does not..." is incorrect because the rule applies to all covered transactions, not just HOEPA loans.

A mortgage broker negotiates a loan for a borrower at 6.5% interest and receives a yield spread premium from the lender. The borrower also pays the broker a $1,500 origination fee directly. Under the LO Comp Rule, this arrangement is:

Drill 2,078 more questions like this, free

More Ethics practice questions

Free practice by category