South Carolina Mortgage Loan Originator (MLO) Practice Exam

The term "loan flipping" specifically refers to the practice of refinancing a borrower’s existing loan primarily to generate additional fees for the lender, rather than to benefit the borrower with improved loan terms. This practice involves encouraging borrowers to refinance repeatedly, often resulting in higher overall costs due to the accumulation of new fees each time a loan is flipped. Loan flipping can be detrimental to borrowers, as it often leads to increased debt without any substantial financial benefit, such as a lower interest rate or better repayment terms.

The other options describe different aspects of loan management or decision-making. Changing loan types frequently does not inherently carry the negative implications as loan flipping, and improving loan terms signifies beneficial changes for the borrower. Transferring a loan to another lender merely involves a shift in ownership and does not reference the problematic practice associated with generating unearned fees. Loan flipping, therefore, stands out due to its exploitative nature aimed at maximizing lender profits at the expense of the borrower’s financial situation.