California Real Estate Practice Exam

On FHA and VA loans, the lender is allowed to charge the borrower a fee as an initial service fee. This is generally referred to as:

1. Acceleration fee

2. Accommodation fee

3. Origination fee

4. Subordination fee

The correct answer is: Acceleration fee

The correct answer is the origination fee. This fee is typically charged by lenders to cover the costs incurred in processing a loan application. An origination fee is a percentage of the loan amount and is designed to compensate the lender for the time and resources spent evaluating and approving the mortgage. When it comes to FHA (Federal Housing Administration) and VA (Veterans Affairs) loans, this fee is a standard part of the loan process and can often be included in the closing costs that the borrower needs to pay. In contrast, an acceleration fee is associated with the lender's right to demand full repayment of a loan if the borrower defaults, which is unrelated to the initial servicing of a loan. An accommodation fee generally pertains to costs for additional services or special arrangements made by the lender, but it is not a standard fee associated with loan origination. The subordination fee refers to costs related to positioning a secondary mortgage in relation to a primary mortgage rather than fees for initiating a loan. Thus, the origination fee is the most appropriate and relevant term used in this context.