Mortgage Mortgage Loan Origination Activities Questions and Answers 2 — Questions and Answers
Question 1: Under TRID rules, when must a Loan Estimate be provided to the borrower after receiving a mortgage application?
- Within 3 business days (Correct answer)
- Within 5 business days
- Within 7 business days
- Within 10 business days
Correct answer: Within 3 business days
TRID requires lenders to provide a Loan Estimate within 3 business days of receiving a completed loan application.
Question 2: Which of the following triggers the obligation to provide a Loan Estimate under the six-piece application rule?
- Receiving the borrower's Social Security number as the sixth data point (Correct answer)
- Receiving the borrower's employment history
- Completing the property appraisal
- Pulling the borrower's credit report
Correct answer: Receiving the borrower's Social Security number as the sixth data point
The Loan Estimate must be issued once all six required data points are collected, and the SSN is commonly the final piece triggering this obligation.
Question 3: A mortgage loan originator is compensated based on the loan amount rather than the interest rate. Which regulation primarily governs this compensation structure?
- Loan Originator Compensation Rule under Regulation Z (Correct answer)
- RESPA Section 8
- Fair Housing Act
- Equal Credit Opportunity Act
Correct answer: Loan Originator Compensation Rule under Regulation Z
The Loan Originator Compensation Rule under Regulation Z prohibits compensation based on loan terms but permits compensation based on loan amount.
Question 4: During the origination process, the borrower's debt-to-income ratio is calculated. Which debts are typically included in the back-end DTI ratio?
- All recurring monthly obligations including the proposed housing payment (Correct answer)
- Only the proposed mortgage payment and property taxes
- Only revolving credit card balances
- Only installment loans with more than 12 months remaining
Correct answer: All recurring monthly obligations including the proposed housing payment
The back-end DTI ratio includes all recurring monthly debt obligations plus the proposed total housing payment.
Question 5: A borrower requests a rate lock during the origination process. What happens if the loan does not close before the lock expiration date?
- The borrower may need to accept the current market rate or pay for a lock extension (Correct answer)
- The lender must honor the original locked rate indefinitely
- The loan application is automatically denied
- The borrower receives a lower rate as compensation
Correct answer: The borrower may need to accept the current market rate or pay for a lock extension
If a rate lock expires before closing, the borrower typically must either accept current market rates or pay a fee to extend the lock period.
Question 6: Which document does the loan originator use to verify a self-employed borrower's income during origination?
- Two years of personal and business tax returns (Correct answer)
- A single recent pay stub
- An employer verification letter
- A bank statement from the last 30 days
Correct answer: Two years of personal and business tax returns
Self-employed borrowers typically must provide two years of personal and business tax returns to document income stability.
Mortgage Mortgage Loan Origination Activities Questions and Answers 2
Under TRID rules, when must a Loan Estimate be provided to the borrower after receiving a mortgage application?