Final answer:
Loan originators must keep records for three years to prove compliance with anti-discrimination laws. The present value of long-term loans like 30-year mortgages is estimated based on their worth in the secondary loan market.
Step-by-step explanation:
Loan originators are required to maintain certain records for three years after the receipt or payment date to demonstrate compliance with various laws, including the Equal Credit Opportunity Act, Fair Housing Act, and the Home Mortgage Disclosure Act. The records that need to be maintained may include application forms, loan documents, and government monitoring information. This information can include the borrower's ethnicity, race, and sex and is used to ensure the lender is not discriminating in its lending practices.
The value of a mortgage loan that spans over a long period, such as 30 years, can be measured in the present by estimating what it could sell for in the secondary loan market. The secondary loan market is where financial institutions buy and sell loans, setting the present value based on what these institutions are willing to pay. This allows banks to sell the loans they originate, thereby receiving a lump sum present value instead of waiting for the full term of the loan for repayment.