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

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Question: 1 / 605

Under what conditions must a commitment fee be refundable?

When the commitment is not contingent upon lender approval

When the commitment is contingent upon borrower approval

When the loan requirements are unmet due to borrower circumstances

A commitment fee is typically considered refundable under specific conditions tied to the borrower's circumstances and the loan's requirements. When the loan requirements are unmet due to borrower circumstances, it implies that the borrower may have experienced issues such as changes in financial situation, creditworthiness, or ability to provide necessary documentation. In such situations, the lender acknowledges that the borrower is not at fault for failing to meet the requirements, which justifies the refund of the commitment fee.

This condition protects the borrower from losing money for situations beyond their control, reinforcing the lender's responsibility to provide a service that meets both parties' standards. Other choices either revolve around conditions that do not typically warrant a refund or involve circumstances that do not directly relate to the borrower's responsibility, making them less applicable to this context.

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When the loan is sold to a third party

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