Loan Officer Loan Origination Activities Questions and Answers

Question 1

Under the Truth in Lending Act (TILA) Loan Originator Compensation Rule, which of the following methods of compensation is permissible?

Accepted Answer

A commission that is a fixed percentage of the total loan amount.

Answer

A bonus paid to the loan originator based on the interest rate of the loans they close.

Answer

Higher compensation for steering a borrower into a loan with a prepayment penalty.

Answer

A payment from both the borrower and the lender in the same transaction.

Question 2

A loan applicant intentionally overstates their annual income and fails to disclose a significant car loan on their Uniform Residential Loan Application (URLA). Which of the following is the MOST severe potential consequence for the applicant?

Accepted Answer

Federal criminal charges, fines, and imprisonment.

Answer

The lender may require a higher down payment.

Answer

The application processing may be delayed.

Answer

The loan application will likely be denied.

Question 3

When is manual underwriting most likely to be used instead of an automated underwriting system (AUS)?

Accepted Answer

When the borrower is self-employed with fluctuating income.

Answer

When the borrower has a very high credit score and low debt-to-income ratio.

Answer

When the loan application is for a standard, conforming loan amount.

Answer

When the borrower is a salaried W-2 employee with a long, stable job history.

Question 4

A loan originator is working with a client who qualifies for several loan products. The originator would receive a significantly higher commission by placing the client in a loan with a higher interest rate and closing costs. To comply with the prohibition on steering under Regulation Z, what must the loan originator do?

Accepted Answer

Avoid steering the consumer to the loan that provides greater compensation unless that loan is in the consumer's interest.

Answer

Choose the loan that provides the highest long-term value for the lending institution.

Answer

Present the consumer with loan options that they are likely to be interested in, including the one with the higher commission.

Answer

Disclose the difference in compensation to the borrower and proceed with the loan that pays more.

Question 5

During the loan application process, when is it permissible under the Equal Credit Opportunity Act (ECOA) for a loan officer to inquire about an applicant's marital status?

Accepted Answer

If the applicant is applying for a joint account or the property is in a community property state.

Answer

Only if the applicant is female.

Answer

Under no circumstances.

Answer

Only if the applicant's credit score is below the lender's minimum requirement.

Question 6

Which section of the Uniform Residential Loan Application (URLA) requires the loan originator to ask for demographic information such as ethnicity, race, and sex for government monitoring purposes?

Accepted Answer

Section 8: Demographic Information

Answer

Section 1: Borrower Information

Answer

Section 5: Declarations

Answer

Section 4: Loan and Property Information