What requirement must be fulfilled by an MLO if a borrower’s first loan is categorized as high-cost under Section 32?

When a borrower’s first loan is categorized as high-cost under Section 32 of the Truth in Lending Act (TILA), one of the key requirements that must be fulfilled is mandatory HUD counseling prior to closing. This requirement is in place to ensure that borrowers fully understand the implications of taking out a high-cost loan, including the costs, fees, and potential risks associated with such loans. The counseling aims to protect consumers by providing them with a better understanding of their financial situations and the structure of the loan they are considering.

High-cost loans often involve additional risks for borrowers due to factors like higher interest rates or fees that can lead to payment defaults. Providing counseling ensures that borrowers receive critical information that can aid in making informed decisions, thus promoting responsibility within the lending process. This mandate aligns with the overarching goals of the SAFE Act, which seeks to enhance consumer protection in the mortgage lending industry.

Other requirements like appraisal reviews, loan term disclosures, or credit report evaluations may be necessary in certain contexts, but for high-cost loans specifically, the emphasis on mandatory HUD counseling serves as a protective measure for borrowers.