What should a loan officer do if they suspect undisclosed debt from a borrower?

In situations where a loan officer suspects undisclosed debt from a borrower, it is crucial to maintain a responsible approach towards lending practices. Refusing to originate the loan demonstrates a commitment to upholding ethical standards and lending regulations. It is vital for a loan officer to ensure that borrowers are fully transparent about their financial situation. Discovering undisclosed debt can significantly impact a borrower's ability to repay the loan, leading to potential risks for both the borrower and the lender.

By choosing to refuse the loan, the officer effectively mitigates risks associated with default and fosters a culture of honesty and accountability within the lending process. This decision aligns with the underlying principle of responsible lending, which is to provide loans only to those who can afford to repay them based on a complete and accurate understanding of their financial circumstances.

The other options, while they may seem proactive in addressing the issue, do not directly address the fundamental obligation to ensure that borrowers are not carrying hidden financial burdens that could threaten repayment capability.