Which statement about brokered loans is true?

Which statement about brokered loans is true?

• A. Brokered loans are not usually sold with any recourse to the broker
• B. The broker is always responsible for repayment
• C. The broker guarantees performance
• D. The broker is never in business after the sale

Answer: (A)

Think about what a broker actually does in a brokered loan. The broker’s role is to bring a borrower and a lender together and arrange the terms; the loan itself remains a contract between the borrower and the lender. Because of that, the broker does not take on the borrower’s obligation to repay. Recourse to the broker for loan repayment is not standard practice, except in rare cases of fraud or misrepresentation where liability might arise from the broker’s conduct. The borrower is responsible for repaying the loan to the lender, not the broker, and the broker typically earns a fee for brokering the deal rather than guaranteeing the loan. The other statements are not accurate because a broker does not guarantee performance, does not become personally liable for repayment, and often continues to operate and participate in future deals after a loan is placed.

Think about what a broker actually does in a brokered loan. The broker’s role is to bring a borrower and a lender together and arrange the terms; the loan itself remains a contract between the borrower and the lender. Because of that, the broker does not take on the borrower’s obligation to repay. Recourse to the broker for loan repayment is not standard practice, except in rare cases of fraud or misrepresentation where liability might arise from the broker’s conduct. The borrower is responsible for repaying the loan to the lender, not the broker, and the broker typically earns a fee for brokering the deal rather than guaranteeing the loan.

The other statements are not accurate because a broker does not guarantee performance, does not become personally liable for repayment, and often continues to operate and participate in future deals after a loan is placed.