The lender asks the borrower to address a shortfall after appraisal. The best action for the MLO is to:

The lender asks the borrower to address a shortfall after appraisal. The best action for the MLO is to:

• A. Ask a relative for the rest
• B. Ask the borrower if they have any undeclared assets
• C. Loan the borrower $2,000 and have them repay after closing
• D. Tell the borrower to take a cash advance on a credit card

Answer: (B)

When a shortfall appears after appraisal, the key step is to verify all funds the borrower plans to bring to closing and ensure they’re fully disclosed and sourceable. Asking the borrower whether they have any undeclared assets helps uncover every available resource that could cover the difference, and it keeps the process compliant with source-of-funds rules. This approach avoids skipping disclosures or relying on unverified financing. Other options introduce risk or improper incentives: asking for a relative’s funds or the MLO lending money can create unverified or misrepresented funding unless all gifts or loans are properly documented and disclosed; a cash advance is a clearly improper source of funds and can constitute predatory or fraudulent behavior. Gift funds are possible, but only if documented correctly with gift letters and provenance, whereas the best first step is to identify and document all assets the borrower already has.

When a shortfall appears after appraisal, the key step is to verify all funds the borrower plans to bring to closing and ensure they’re fully disclosed and sourceable. Asking the borrower whether they have any undeclared assets helps uncover every available resource that could cover the difference, and it keeps the process compliant with source-of-funds rules. This approach avoids skipping disclosures or relying on unverified financing.

Other options introduce risk or improper incentives: asking for a relative’s funds or the MLO lending money can create unverified or misrepresented funding unless all gifts or loans are properly documented and disclosed; a cash advance is a clearly improper source of funds and can constitute predatory or fraudulent behavior. Gift funds are possible, but only if documented correctly with gift letters and provenance, whereas the best first step is to identify and document all assets the borrower already has.