Please read
the following case study and then answer the following multiple choice
questions in the Comments section below:
When Jon
graduated college a few years back he was bright-eyed and bushy-tailed and
couldn’t wait to get out into the professional world and make some real
money. Jon landed a great job and
started living the American dream. On
one unfortunate day, Jon was in a serious accident that left him unable to work
for two months. To make matters worse,
Jon was uninsured and on top of being out of work he now had a mountain of
medical bills to face. Soon after, Jon
was unable to make payments on his car, apartment, and student loans, seriously
harming his credit.
Once Jon
recovered from the accident, he was able to go back to work and slowly, but
surely, he began to chip away at the debt.
During this time Jon gets married and wanting to start a family, he and
his wife begin to look at homes and end up finding one that they really
want. Upon meeting with Robb at “Done
Deal Mortgage,” Jon finds out that his credit is still not good enough to
qualify for a conventional mortgage. Jon
was a little disappointed, but then Rob suggests a high-cost loan. Robb explains what a high-cost mortgage is
and even though it was not what Jon was hoping for, he decides to go for it
because he wants to make his wife happy.
Robb mentions that Jon must receive home
ownership counseling on the advisability and appropriateness of the loan
transaction. When Jon asks where he
needs to go to receive such counseling, Robb tells him he has already received
the counseling because Robb had just advised him of the risks of high cost home
loans. In fact, Robb even provides him a
certificate of completion.
Robb then
starts looking at Jon’s ability to repay the loan. After considering Jon’s income, current
obligations, and employment status, Robb concludes that Jon’s total monthly
debts were about 59% of his total monthly income. Robb knows this is a little risky, but
“reasonably believes” that Jon will be able to repay the loan, so he decides to
continue on with trying to get the loan for Jon. Further along in the process, an appraisal is
ordered on the property. The appraisal
company charged $250, for the appraisal, but since Robb feels that he has gone
above and beyond for Jon, he decides to say that it was $500 for the appraisal,
and pocket the additional $250 as a finance charge.
In underwriting
the loan is rejected and Jon and his wife are heartbroken. Let us ask some questions here to find out
just what went wrong.
- What did Robb do wrong regarding home ownership
counseling?
A. Robb did everything right
B. He didn’t have Robb get home ownership counseling
through a counselor approved by the North Carolina Housing Finance Agency
C. He didn’t disclose that Jon needed home ownership
counseling within the correct timeframe
D. North Carolina doesn’t have a home ownership
counseling requirement for high cost loans
- What mistake did Robb make regarding Jon’s
repayment ability?
A. He overlooked the fact that his monthly debts were
59%, which is 9% above the 50% threshold
B. Robb didn’t consider current and expected expenses
C. Robb didn’t take into account Rob’s employment status
D. Robb did everything right
- Is Robb allowed to charge Jon extra for the
appraisal?
A. Yes, Robb worked hard for Jon and should be able to
pocket a little extra for his hard work
B. Yes, there are no limitations on finance fees and
charges
C. No, it is a prohibited practice for a lender to
finance any fees/charges payable to a third party
D. None of the above
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