Mortgage Loan Origination Activities 2 — Questions and Answers
Question 1: Under RESPA, within how many business days must a lender provide a Loan Estimate after receiving a completed loan application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
RESPA and TILA-RESPA Integrated Disclosure (TRID) rules require lenders to deliver the Loan Estimate within 3 business days of receiving a completed application.
Question 2: A borrower's loan application is considered 'complete' under TRID when the lender has collected which six pieces of information?
- Name, SSN, income, property address, estimated value, and loan amount (Correct answer)
- Name, DOB, employment history, assets, credit score, and loan purpose
- Name, income, assets, liabilities, credit history, and property type
- Name, SSN, income, property type, loan term, and interest rate preference
Correct answer: Name, SSN, income, property address, estimated value, and loan amount
TRID defines a complete application as: borrower's name, income, SSN, property address, estimated property value, and desired loan amount.
Question 3: Which document replaced the Good Faith Estimate (GFE) and Truth-in-Lending (TIL) disclosure for most residential mortgages starting in October 2015?
- HUD-1 Settlement Statement
- Closing Disclosure
- Loan Estimate (Correct answer)
- Uniform Residential Loan Application
Correct answer: Loan Estimate
The Loan Estimate replaced the GFE and early TIL disclosure as part of the TRID rule effective October 3, 2015.
Question 4: During loan origination, what is the primary purpose of the 1003 form (Uniform Residential Loan Application)?
- To authorize a credit pull and income verification
- To collect borrower financial and property information needed to evaluate the loan (Correct answer)
- To disclose estimated closing costs to the borrower
- To record the appraiser's determination of property value
Correct answer: To collect borrower financial and property information needed to evaluate the loan
The URLA (Form 1003) is the standard application used to gather borrower demographics, income, assets, liabilities, and property details for underwriting.
Question 5: A mortgage loan originator (MLO) collects an upfront application fee before the borrower has received the Loan Estimate. Under TRID, this practice is:
- Allowed if the fee is disclosed verbally at application
- Allowed for any amount the lender deems reasonable
- Prohibited, except for a bona fide credit report fee (Correct answer)
- Allowed if the borrower signs a fee agreement first
Correct answer: Prohibited, except for a bona fide credit report fee
TRID prohibits collecting fees from a borrower before they have received and acknowledged the Loan Estimate, except for a bona fide and reasonable credit report fee.
Question 6: Which of the following is an example of a 'changed circumstance' that may permit a lender to re-issue a revised Loan Estimate?
- The lender made an arithmetic error on the original estimate
- The borrower requests a different loan program after reviewing the Loan Estimate (Correct answer)
- The lender underestimated title fees due to internal miscalculation
- Interest rates increased while the application was in processing
Correct answer: The borrower requests a different loan program after reviewing the Loan Estimate
A borrower-requested change to loan terms or program constitutes a valid changed circumstance allowing re-disclosure of a revised Loan Estimate.
Question 7: Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), a state-licensed MLO must renew their license:
- Every two years by passing a new NMLS exam
- Annually, including completion of continuing education requirements (Correct answer)
- Every three years with a background check only
- Upon each new employer change, with no time limit otherwise
Correct answer: Annually, including completion of continuing education requirements
The SAFE Act requires state-licensed MLOs to renew their license annually and complete at least 8 hours of NMLS-approved continuing education.
Mortgage Loan Origination Activities 2
Under RESPA, within how many business days must a lender provide a Loan Estimate after receiving a completed loan application?