West Virginia Mortgage Law Practice Test

In West Virginia, all of the following fees are permissible in conjunction with a loan origination except:

1. Appraisal fee

2. Credit report fee

3. Origination fee

4. Yield spread premium

The correct answer is: Appraisal fee

In West Virginia, the definition of permissible fees in conjunction with loan origination is essential for understanding what can be charged to borrowers when processing their loans. The correct answer highlights the concept of yield spread premium as a fee that is not permissible under certain regulations. Yield spread premiums are often thought of as incentives to lenders for offering loans with higher interest rates. In the context of loan origination, this fee becomes contentious because it could potentially lead to predatory lending practices, where borrowers are steered into loans that may not serve their best interests. As a result, many regulations prohibit or limit the use of yield spread premiums to protect consumers. On the other hand, appraisal fees, credit report fees, and origination fees are generally acceptable as they are associated directly with the costs incurred during the loan origination process: - **Appraisal fees** are typically required to assess the value of the property, which is critical for determining the loan amount. - **Credit report fees** fund the procurement of a borrower's credit history, which lenders must review to evaluate creditworthiness. - **Origination fees** compensate lenders for processing the loan application, evaluating the borrower's creditworthiness, and preparing the necessary documentation. Understanding this distinction is crucial for complying with the regulations