Which of the following is a characteristic of loans made by mortgage loan brokers?

• A. They act as intermediaries, connecting borrowers with lenders but do not fund the loans themselves.
• B. They typically service the loans after origination.
• C. They use their own funds to directly finance the loans.
• D. They are regulated in the same way as commercial banks.

Answer: (A)

Verified step by step guidance

1. Understand the role of mortgage loan brokers: Mortgage loan brokers act as intermediaries between borrowers and lenders. They do not use their own funds to finance loans but instead connect borrowers with lenders who provide the financing.
2. Clarify the concept of loan servicing: Loan servicing involves managing the loan after origination, including collecting payments, handling escrow accounts, and communicating with borrowers. Mortgage loan brokers typically do not service loans; this is usually done by lenders or specialized servicing companies.
3. Differentiate funding sources: Mortgage loan brokers do not use their own funds to directly finance loans. Instead, they rely on lenders to provide the funds for the loans they arrange.
4. Examine regulatory differences: Mortgage loan brokers are not regulated in the same way as commercial banks. Commercial banks are subject to stricter regulations due to their role in accepting deposits and providing a wide range of financial services.
5. Identify the correct characteristic: Based on the above clarifications, the correct characteristic of loans made by mortgage loan brokers is that they act as intermediaries, connecting borrowers with lenders but do not fund the loans themselves.