West Virginia Mortgage Law Practice Test

Analysis of tangible net benefit is required for a refinance when:

1. The loan being refinanced involves a high-interest rate

2. The loan being refinanced was originated within the last 12 months

3. The loan being refinanced was originated within the last 24 months

4. The new loan involves an adjustable rate

The correct answer is: The loan being refinanced involves a high-interest rate

The analysis of tangible net benefit is required for a refinance primarily to ensure that the borrower is actually gaining a financial advantage from the new loan. This is particularly significant in cases where the original loan has a high-interest rate. A high-interest rate suggests that the borrower may be paying more than necessary on their current loan, and refinancing could potentially lower their monthly payments, reduce the overall interest paid, or improve their loan terms. This analysis focuses on whether the benefits of refinancing, such as obtaining a lower interest rate or reducing the term of the loan, outweigh any associated costs, including fees and closing costs. If the original loan has a high-interest rate, refinancing offers a concrete opportunity to realize significant savings, making the tangible net benefit analysis a critical component in the decision-making process. Other options listed may not directly mandate this analysis. For instance, loans that were just originated within a specific time frame or involve different rate structures do not inherently require an analysis of tangible net benefits unless combined with high-interest rates or other qualifying factors suggesting the borrower would benefit financially. Thus, focusing on the high-interest rate as a trigger for conducting this analysis is essential to ensuring borrowers are making informed financial decisions.