If a borrower’s first loan is subject to Section 32, what must an MLO require before closing?

When a borrower’s first loan falls under Section 32 of the Home Ownership and Equity Protection Act (HOEPA), the Mortgage Loan Originator (MLO) is required to ensure that the borrower has received proper counseling before the loan can close. This counseling is crucial because Section 32 loans typically involve higher costs and risks associated with high-cost mortgages.

Specifically, the requirement for HUD-approved counseling aims to protect consumers by ensuring that they fully understand the terms of the loan, including potential risks and costs. This counseling must occur prior to closing, allowing the borrower to make an informed decision about proceeding with the loan. Thus, confirming that this counseling has taken place is a critical step that the MLO must take to comply with the requirements of Section 32.

The other choices do not address the specific requirements set forth under Section 32. A signed statement from the borrower releasing the creditor from liability under HOEPA does not align with the intent of the counseling requirement, and a statement from a realtor or an independent HECM counselor is irrelevant in the context of ensuring compliance with HOEPA regulations. The accurate mandate focuses solely on confirming that appropriate counseling has been completed before closing the loan.