West Virginia Mortgage Law Practice Test

Excluding third-party fees, the total points and fees that may be collected on a mortgage loan by a lender or broker may not exceed:

1. 1%

2. 3%

3. 4%

4. 5%

The correct answer is: 1%

The correct answer is rooted in the regulations governing mortgage lending, particularly those established under the Truth in Lending Act (TILA) and related federal guidelines. In most circumstances, particularly for loans that are deemed high-cost mortgages, the total points and fees that can be charged by lenders or brokers must not exceed 1% of the total loan amount, excluding third-party fees. This limit is designed to protect consumers from excessive costs related to borrowing. When lenders are regulated to charge fees that stay within a capped percentage, it reduces the risk of predatory lending practices. Keeping costs manageable and in line with borrowers' expectations is a fundamental aspect of promoting fairness and transparency in the mortgage lending process. Therefore, understanding this limitation is crucial for anyone engaging in mortgage transactions, ensuring compliance with legal standards and fostering a more equitable lending environment.