What is the maximum finance charge that may be collected in a subordinate loan transaction?

The maximum finance charge that may be collected in a subordinate loan transaction is established by various regulations, including those set by federal and state laws. In this context, the correct answer is 18%. This reflects the legal limits placed on finance charges to protect borrowers from excessively high costs associated with subordinate loans.

Subordinate loans, which are often second mortgages or home equity lines of credit, are typically riskier for lenders. Therefore, regulations have been created to ensure that borrowers are treated fairly and are not subjected to predatory lending practices. Knowing the maximum finance charge helps mortgage loan originators guide clients properly and maintain compliance with these regulations.

The other options reflect higher limits that exceed the legal threshold, which can result in compliance issues for lenders if they attempt to charge those rates in subordinate loan transactions. Understanding these figures is crucial for MLOs to ensure that they remain within appropriate legal boundaries while serving their clients’ financing needs.