Applied Methods and Techniques Flashcards

A borrower has $2,100 in monthly debt payments (including the new car loan) and $6,000 gross monthly income. What is the debt-to-income (DTI) ratio?

Answer: 35%

DTI = $2,100 / $6,000 = 0.35, or 35%.

Which skip-tracing method is generally the most appropriate first step for locating a borrower who stopped responding?

Answer: Review the application's references and contact data, then search permissible databases

Using file data and permissible databases is effective and avoids prohibited third-party disclosures.

Under the FDCPA, when a debt collector contacts a third party only to obtain location information, what may it NOT do?

Answer: State that the consumer owes a debt

The FDCPA prohibits telling third parties that the consumer owes a debt during location contacts.

What is the main purpose of a stipulation ("stip") on a conditional auto loan approval?

Answer: To require specific documents or conditions before funding

Stips such as proof of income or residence must be satisfied before the contract is funded.

Which red flag most strongly suggests a synthetic identity on a credit application?

Answer: A thin, recently created credit file paired with an SSN issued long ago and no matching history

Synthetic identities often combine a real SSN with fabricated details, producing new, thin files with mismatched history.

Under the FCRA, what must a lender do when it uses information from a consumer report to offer less favorable terms?

Answer: Provide a risk-based pricing notice or credit score disclosure

The FCRA risk-based pricing rule requires notice when credit reports lead to materially less favorable terms.

In a simple-interest auto loan, how does paying several days early affect the borrower?

Answer: Less interest accrues, so more of the payment goes to principal

Simple interest accrues daily on the outstanding principal, so early payment reduces interest owed.