SAFE Origination Activities 2 — Questions and Answers
Question 1: A borrower asks an MLO to submit their loan application to multiple lenders simultaneously without disclosing this to each lender. What should the MLO do?
- Submit to all lenders as requested since it benefits the borrower
- Refuse and explain that undisclosed multiple submissions are improper (Correct answer)
- Submit to all lenders but note it on the application
- Submit only to the lender most likely to approve the loan
Correct answer: Refuse and explain that undisclosed multiple submissions are improper
MLOs must act with integrity and cannot participate in practices that mislead lenders; undisclosed simultaneous submissions are improper.
Question 2: Under RESPA, which of the following is prohibited when an MLO refers a borrower to a settlement service provider?
- Recommending a provider the MLO has used before
- Receiving a fee or thing of value for making the referral (Correct answer)
- Providing a list of approved providers to the borrower
- Disclosing an affiliated business relationship
Correct answer: Receiving a fee or thing of value for making the referral
RESPA Section 8 prohibits receiving any fee, kickback, or thing of value in exchange for referring settlement service business.
Question 3: When must an MLO provide the borrower with a copy of the appraisal report?
- Only if the borrower requests it in writing
- At least 3 business days before loan consummation (Correct answer)
- Within 3 calendar days after the appraisal is completed
- Only at closing if the loan is approved
Correct answer: At least 3 business days before loan consummation
ECOA/Regulation B requires lenders to provide a copy of the appraisal at least 3 business days before consummation.
Question 4: A borrower's credit score is 580. The MLO tells the borrower they have a 680 score to help them get a better rate. This is an example of:
- Steering
- Loan flipping
- Misrepresentation (Correct answer)
- Predatory lending
Correct answer: Misrepresentation
Falsifying a borrower's credit score on a loan application constitutes misrepresentation and mortgage fraud.
Question 5: Which document provides an itemized list of all settlement charges and must be provided to borrowers at or before closing?
- Loan Estimate
- Closing Disclosure (Correct answer)
- Good Faith Estimate
- HUD-1 Settlement Statement for new loans
Correct answer: Closing Disclosure
Under TRID, the Closing Disclosure itemizes all final settlement charges and must be provided at least 3 business days before consummation.
Question 6: An MLO discovers mid-process that a borrower's employment was terminated. What is the MLO's obligation?
- Proceed with the loan since underwriting already approved it
- Notify the lender immediately of the material change in circumstances (Correct answer)
- Ask the borrower to find new employment before disclosing
- Advise the borrower to omit this fact from the loan file
Correct answer: Notify the lender immediately of the material change in circumstances
MLOs must disclose material changes in borrower circumstances to the lender promptly to maintain accuracy in the loan file.
Question 7: Under the S.A.F.E. Act, a state-licensed MLO who wants to temporarily conduct business in a new state while their new state license is pending may do so under which provision?
- Reciprocity exemption
- Temporary authority to operate (Correct answer)
- Interstate license portability rule
- Federal preemption authority
Correct answer: Temporary authority to operate
The Economic Growth Act of 2018 added a temporary authority to operate provision allowing licensed MLOs to work in a new state while their application is pending.
SAFE Origination Activities 2
A borrower asks an MLO to submit their loan application to multiple lenders simultaneously without disclosing this to each lender.
What should the MLO do?