For loans less than $20,000, what is the points and fees threshold?

The correct choice regarding the points and fees threshold for loans less than $20,000 aligns with the guidelines established for smaller loan amounts. For loans in this category, the regulations stipulate that the limit for points and fees is set at 8% of the total loan amount, but not exceeding a hard cap of $1,000. This means that for any loan amount below $20,000, the total of points and fees charged cannot surpass either 8% of the loan amount or $1,000, whichever is less.

Knowing this threshold is crucial for Mortgage Loan Originators because it directly affects loan structuring and compliance with federal lending laws, particularly under the laws governing high-cost mortgages and the ability to offer affordable financing to borrowers. Understanding these thresholds helps MLOs ensure that they are providing responsible lending practices without imposing excessive fees that could harm borrowers, particularly those seeking smaller loans.