CMA - Certified Mortgage Advisor Loan Origination Process Questions and Answers 1 — Questions and Answers
Question 1: A borrower receives a Closing Disclosure (CD) from their lender. Three days later, but before closing, the lender discovers a tolerance violation that requires a refund to the borrower. Which of the following is the correct procedure for the lender to follow?
- Issue a revised Closing Disclosure with the correction and proceed to closing as scheduled.
- A new 3-day waiting period is not required, and the correction can be shown on a revised CD provided at closing. (Correct answer)
- Delay the closing, issue a new CD, and start a new 3-day waiting period.
- Cancel the loan and require the borrower to re-apply.
Correct answer: A new 3-day waiting period is not required, and the correction can be shown on a revised CD provided at closing.
According to the TILA-RESPA Integrated Disclosure (TRID) rule, a new 3-day waiting period for the Closing Disclosure is only triggered by three specific changes: 1) The APR becomes inaccurate, 2) The loan product changes, or 3) A prepayment penalty is added. A tolerance violation refund does not fall into these categories, so a revised CD can be provided at or before consummation without restarting the waiting period.
Question 2: During the loan origination process, which professional is primarily responsible for evaluating the borrower's risk profile, verifying application data, and making the final credit decision?
- Loan Processor
- Appraiser
- Loan Underwriter (Correct answer)
- Mortgage Loan Originator
Correct answer: Loan Underwriter
The Loan Underwriter is the individual who makes the final decision to approve or deny a loan. They are responsible for assessing the risk of the loan by analyzing the borrower's creditworthiness, capacity to repay, and the collateral, ensuring the loan meets lender and investor guidelines. The Loan Originator works with the client to find and apply for the loan, and the Loan Processor gathers and organizes the necessary documentation for the underwriter.
Question 3: A self-employed borrower is applying for a mortgage. In addition to the standard documentation like bank statements and photo ID, which of the following documents would a lender most likely require to verify their income?
- A letter from their previous employer.
- Two years of personal and business tax returns, along with a current profit and loss statement. (Correct answer)
- Copies of their business marketing materials.
- Their most recent 30 days of client invoices.
Correct answer: Two years of personal and business tax returns, along with a current profit and loss statement.
For self-employed borrowers, lenders need to verify income stability over a longer period. Therefore, they typically require at least two years of full tax returns (both personal and business) and a current year-to-date profit and loss (P&L) statement to accurately assess the borrower's qualifying income.
Question 4: Which of the following represents the correct sequence of major milestones in the typical mortgage loan origination process?
- Closing, Underwriting, Application, Pre-approval
- Application, Closing, Processing, Underwriting
- Pre-approval, Application, Underwriting, Closing (Correct answer)
- Processing, Pre-approval, Closing, Application
Correct answer: Pre-approval, Application, Underwriting, Closing
The standard loan origination process begins with the borrower getting pre-approved to understand their budget. This is followed by a formal loan application. The application then goes through processing and underwriting, where the lender verifies the information and makes a credit decision. The final step is the closing, where documents are signed and the loan is funded.
Question 5: A first-time homebuyer is working with a Certified Mortgage Advisor (CMA). They find a home and submit a complete loan application on Monday. According to the Real Estate Settlement Procedures Act (RESPA), by which day must the lender provide the borrower with a Loan Estimate?
- Tuesday of the same week
- Thursday of the same week (Correct answer)
- Monday of the following week
- At the time of closing
Correct answer: Thursday of the same week
RESPA, as implemented through the TRID rule, requires lenders to provide borrowers with a Loan Estimate (LE) within three business days of receiving a complete loan application. A complete application is defined by six key pieces of information. If the application is submitted on Monday, the third business day would be Thursday.
Question 6: During loan processing, the lender orders a title search. What is the primary purpose of this action?
- To determine the property's market value.
- To verify the borrower's credit history.
- To ensure the seller has the legal right to sell the property and to identify any liens or claims. (Correct answer)
- To calculate the borrower's debt-to-income ratio.
Correct answer: To ensure the seller has the legal right to sell the property and to identify any liens or claims.
A title search is a critical step in loan processing to examine public records and ensure that the seller has a clear and marketable title to the property. It identifies any existing liens, judgments, or other claims (encumbrances) that could affect the transfer of ownership or the lender's security interest in the property.
CMA - Certified Mortgage Advisor Loan Origination Process Questions and Answers 1
A borrower receives a Closing Disclosure (CD) from their lender.
Three days later, but before closing, the lender discovers a tolerance violation that requires a refund to the borrower.
Which of the following is the correct procedure for the lender to follow?