Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

The condition that allows a borrower to receive a refund of the commitment fee is tied to their inability to comply with the loan agreement due to uncontrollable circumstances. This scenario addresses situations that are beyond the borrower’s control, such as serious illness, job loss, or natural disasters, which can impact their financial situation and ability to proceed with the loan. In such cases, lenders typically recognize the borrower’s plight and may issue a refund of the commitment fee as a gesture of goodwill, acknowledging that the borrower was willing but unable to fulfill the loan obligation.

The other choices do not generally meet the criteria for a commitment fee refund. For instance, failure to pay the first payment is an active decision by the borrower, which does not warrant a refund. Completion of the appraisal is a standard part of the loan process and does not imply any circumstances that would necessitate a refund. Lastly, a change in the loan interest rate may affect the loan terms but does not assure a refund of the commitment fee, as this is typically regarded as a decision taken willingly by the lender rather than a condition affecting the borrower’s ability to follow through with the loan.