Mortgage Loan Originator (MLO) Licensing Practice Test

Question: 1 / 605

What type of loan requires a borrower to provide notice when transferring servicing rights?

Home Equity Loan

Mortgage Loan

A mortgage loan requires a borrower to provide notice when transferring servicing rights because the servicing of the loan can affect various aspects of the borrower's financial obligations. In a mortgage, the servicer is responsible for managing the day-to-day tasks of the loan, such as collecting payments, managing escrow accounts, and handling customer inquiries. When the servicing rights are transferred to another company, maintaining clear communication with the borrower is crucial. This process ensures the borrower knows whom to contact for payment and other loan-related inquiries, thereby preventing potential confusion or mishandling of payments.

In other types of loans, such as home equity loans, FHA loans, or payday loans, the servicing procedures may not carry the same level of regulatory requirements regarding notification about transferring servicing rights, making mortgage loans unique in this context.

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FHA Loan

Payday Loan

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