West Virginia Mortgage Law Practice Test

In his transaction with the Morgans, Ryan collects a prohibited:

1. Application fee

2. Origination fee

3. Late fee

4. Counseling fee

The correct answer is: Application fee

The correct answer is that Ryan collected a prohibited application fee. In West Virginia, certain fees are regulated to protect consumers from unfair practices, and application fees can fall into that category when they are not clearly justified or are assessed without providing a tangible service or benefit to the borrower. The application fee is often seen as a barrier to access for potential borrowers, especially if it is collected upfront without guaranteeing any commitment on the lender's part. Regulations typically focus on protecting consumers from fees that may not lead to a meaningful or necessary service. Other fees, like origination fees, late fees, and counseling fees, may have regulations as well but are generally more frequently recognized as permissible within certain guidelines. Origination fees are usually standard, as they cover the costs of processing the loan. Late fees are also common as they serve as a penalty for missed payments. Counseling fees, when legitimate and properly disclosed, are typically meant to help the borrower understand their mortgage options and obligations. Thus, by focusing on the application fee, we highlight the importance of transparency and fairness in lending practices.