Mortgage Loan Origination Activities Questions and Answers — Questions and Answers
Question 1: A borrower has a gross monthly income of $6,000. Their proposed monthly mortgage payment (PITI) is $1,800. They also have a $400 monthly car payment and a $200 monthly student loan payment. What is their back-end debt-to-income (DTI) ratio?
- 30%
- 36%
- 40% (Correct answer)
- 50%
Correct answer: 40%
The back-end DTI ratio is calculated by dividing the borrower's total recurring monthly debt by their gross monthly income. In this scenario, the total monthly debt is the sum of the proposed PITI ($1,800), the car payment ($400), and the student loan payment ($200), which equals $2,400. Dividing $2,400 by the gross monthly income of $6,000 results in 0.40, or 40%.
Question 2: On the Uniform Residential Loan Application (URLA), which section requires the borrower to disclose if they are a party to a lawsuit or have any outstanding judgments?
- Section 1: Borrower Information
- Section 5: Declarations (Correct answer)
- Section 2: Financial Information – Assets and Liabilities
- Section 4: Loan and Property Information
Correct answer: Section 5: Declarations
Section 5 of the URLA, titled 'Declarations,' specifically asks questions about the borrower's past financial history, including outstanding judgments, previous foreclosures, and whether they are currently a party to a lawsuit.
Question 3: Under the Fair Credit Reporting Act (FCRA), which of the following actions requires a "permissible purpose" to be legally performed by a mortgage loan originator?
- Discussing general loan products with a potential applicant.
- Providing a Loan Estimate after receiving a completed application.
- Accessing a consumer's credit report. (Correct answer)
- Verifying the applicant's employment history.
Correct answer: Accessing a consumer's credit report.
The Fair Credit Reporting Act (FCRA) strictly governs who can access a consumer's credit report. An MLO must have a legally defined 'permissible purpose,' such as a consumer's application for credit, before they are allowed to pull the consumer's credit file.
Question 4: A mortgage loan originator is concerned that a property's appraisal value might come in too low. Which of the following actions is permissible under the Appraiser Independence Requirements (AIR)?
- Telling the appraiser the minimum value needed for the loan to be approved.
- Withholding payment from the appraiser because the value came in lower than expected.
- Selecting an appraiser specifically because they are known for providing high valuations.
- Asking the appraiser to consider additional, relevant comparable sales not included in the initial report. (Correct answer)
Correct answer: Asking the appraiser to consider additional, relevant comparable sales not included in the initial report.
Appraiser Independence Requirements (AIR) prohibit any actions that could coerce or unduly influence an appraiser's judgment. However, it is permissible to provide the appraiser with additional objective information, such as relevant comparable sales, or ask for corrections of factual errors. The other options represent prohibited attempts to influence the outcome.
Question 5: According to the TILA-RESPA Integrated Disclosure (TRID) rule, a lender must provide the Loan Estimate to a borrower within what timeframe after receiving a completed loan application?
- At the time of application
- No later than 3 business days (Correct answer)
- No later than 7 business days
- At least 3 business days before consummation
Correct answer: No later than 3 business days
The TRID rule mandates that once a lender receives the six required pieces of information that constitute a completed application, they must deliver or place the Loan Estimate in the mail to the consumer no later than the third business day after receipt.
Question 6: When evaluating a salaried borrower's qualifying income, which of the following would an underwriter be LEAST likely to consider stable and recurring for the purpose of loan qualification?
- A one-time bonus received for a special project completed last month. (Correct answer)
- The borrower's base salary from a full-time job held for five years.
- Consistent overtime income received monthly for the past three years.
- Commission income that has been consistently earned for the past two years.
Correct answer: A one-time bonus received for a special project completed last month.
Underwriters must determine that income is stable, predictable, and likely to continue. A one-time bonus, by its nature, is not recurring and therefore cannot be considered stable income for qualifying purposes. In contrast, base salary and variable income like overtime or commission can be used if there is a documented history (typically two years) of consistent receipt.
Mortgage Loan Origination Activities Questions and Answers
A borrower has a gross monthly income of $6,000.
Their proposed monthly mortgage payment (PITI) is $1,800.
They also have a $400 monthly car payment and a $200 monthly student loan payment.
What is their back-end debt-to-income (DTI) ratio?