Question

A broker selling a mobile home plans on advertising that no down payment will be required since he will direct a buyer to secure a loan for the down payment from a loan officer he does business with. Which of the following statements is correct about this situation?

Option 1: It is an ethical and legal practice in the real estate industry.
Option 2: It is considered unethical and illegal.
Option 3: This practice may be legal, but it's considered unethical.
Option 4: It is a common practice that benefits both the buyer and seller.

Answer 1

The practice of a broker advertising a mobile home with no down payment needed because he will facilitate a loan for the down payment is ethically questionable, potentially risky for the borrower, and may be reflective of subprime lending practices.

Step-by-step explanation:

Regarding the situation where a broker is advertising that no down payment will be required for a mobile home because he will direct a buyer to secure a loan for the down payment from a loan officer he does business with, it is important to consider the ethical and legal implications. While such practices can sometimes be legal, they often raise ethical concerns, especially if the loan terms are not fully disclosed or are misleading to the borrower. Moreover, loans that require no down payment and are paired with adjustable-rate mortgages can be risky and potentially lead to financial difficulties for the borrower, especially if they are not financially sophisticated. These practices can be reminiscent of the kinds of lending that led up to the financial crisis, characterized by subprime lending and NINJA loans which ultimately posed a significant risk to both the borrower and the financial system.