In what scenario does the loan originator have no liability?

The scenario in which the loan originator has no liability is when the loan does not close due to a third party issue. This is because third party issues, such as problems with appraisals, title disputes, or issues with a credit reporting agency, are outside the control of the loan originator. The loan originator can be diligent in preparing the loan application, gathering required documents, and ensuring that all necessary steps are taken; however, if a third party fails to perform or provides inaccurate information that affects the closing, the loan originator is not held responsible for the resulting failure to close the loan.

In contrast, if the borrower fails to provide required documents, the loan originator may be held accountable for not adequately guiding the borrower through the document submission process. Similarly, if the loan does not close due to market conditions, such as interest rate fluctuations or market instability, the originator could still bear some responsibility for failing to advise the borrower correctly in advance about timing and market conditions. Lastly, if the borrower withdraws the application, this is a direct action taken by the borrower rather than an external circumstance, meaning the loan originator would not be liable in this case, but there may still be consequences related to their process or communication that