Question

A mortgage broker structures a loan priced with two points in borrower credit. He suggests that, based on the limited amount of cash the borrower has on hand to close, it may be best to take a slightly higher rate and use the premium generated to subsidize the closing costs. After consideration, the borrower agrees and moves forward. This is:

Answer 1

Legal and ethical

Step-by-step explanation:

Considering the scenario described above it is revealed that the borrower has the choice of choosing how he would prefer or have to structure his oan, while the originator or mortgage broker follows by the borrower's judgment or decision.

Hence, in this case, it can be concluded that such a scenario is considered LEGAL and ETHICAL use of what is now referred to as borrower credit.

It should be noted that this is an argument against Yield spread premium, whereby borrowers are assumed to be ignorant that YSP is being charged.