Packing involves which of the following scenarios?

Packing involves which of the following scenarios?

• A. Including unrelated insurance in the loan and making the borrower pay for it
• B. Removing insurance from the loan
• C. Increasing the interest rate to cover insurance
• D. Providing insurance at no extra cost to the borrower

Answer: (A)

Packing means including unrelated insurance in the loan and making the borrower pay for it. This practice hides the true cost of the loan by rolling insurance premiums into the principal and monthly payments, often without providing a corresponding borrower benefit, and it can violate disclosure rules that require clear, itemized loan costs. In this scenario, the lender adds insurance into the loan amount and passes the cost to the borrower, which is why this option is the correct one. The other choices describe removing insurance, raising the rate to cover insurance, or offering insurance for free, none of which constitute packing.

Packing means including unrelated insurance in the loan and making the borrower pay for it. This practice hides the true cost of the loan by rolling insurance premiums into the principal and monthly payments, often without providing a corresponding borrower benefit, and it can violate disclosure rules that require clear, itemized loan costs. In this scenario, the lender adds insurance into the loan amount and passes the cost to the borrower, which is why this option is the correct one. The other choices describe removing insurance, raising the rate to cover insurance, or offering insurance for free, none of which constitute packing.