In which scenario can a loan originator charge a pre-payment penalty?

The correct answer is when the pre-payment penalty is specified in the loan agreement signed by the borrower. This means that for a loan originator to legally charge a pre-payment penalty, it must be explicitly stated in the loan documents that the borrower agrees to such terms. This provision protects both the lender's interests and ensures that the borrower is fully aware of the financial implications of paying off their loan early.

Pre-payment penalties are typically included in contracts as a way for lenders to mitigate the risk associated with borrowers paying off loans sooner than anticipated. When a borrower signs the agreement, they acknowledge their acceptance of all terms, including any penalties for early repayment. Therefore, proper disclosure and agreement to such terms in the documentation are crucial for the enforceability of pre-payment penalties.

Options referencing a blanket policy, like charging a pre-payment penalty in all agreements without specific consent, or linking the penalty solely to first-time home buyers, do not accurately reflect the conditions under which these penalties can be charged. The clarity and specificity in the loan agreement are what allow for this charge.