Loan Origination Activities Flashcards
7 cards from real Mortgage practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Loan Origination Activities flashcards as text
A lender is calculating a borrower's debt-to-income (DTI) ratio for loan origination. Which of the following debts is correctly included in the back-end DTI?
Answer: The proposed housing payment plus all monthly installment and revolving debt obligations
The back-end (total) DTI includes the proposed housing payment (PITI) plus all other recurring monthly debt obligations such as car loans, student loans, credit cards, and other installment debts.
What is the purpose of the Closing Disclosure (CD) in the loan origination process?
Answer: To provide the borrower with final loan terms and closing costs at least 3 business days before consummation
The Closing Disclosure provides the borrower with final, actual loan terms and costs and must be delivered at least 3 business days before loan consummation under TRID.
Under anti-steering provisions of the Dodd-Frank Act, an MLO is prohibited from directing a borrower to a loan primarily because it:
Answer: Generates greater compensation for the MLO than other loans the borrower qualifies for
Anti-steering rules prohibit MLOs from recommending a loan product primarily because it pays the originator more, rather than because it is in the borrower's interest.
A borrower is self-employed. Which documents are typically required to verify self-employment income during origination?
Answer: Two years of personal and business tax returns, year-to-date P&L, and business bank statements
For self-employed borrowers, agency guidelines require two years of personal and business tax returns, a year-to-date profit and loss statement, and often business bank statements to verify income stability.
What is the 'three-day rescission period' in residential mortgage lending?
Answer: The right of a borrower to cancel a refinance on their primary residence within 3 business days of closing
Under TILA's right of rescission, a borrower may cancel a refinance on their principal dwelling within 3 business days of closing, receipt of the Notice of Right to Cancel, or receipt of all material disclosures, whichever is latest.
When originating a VA loan, what is the primary purpose of the Certificate of Eligibility (COE)?
Answer: To confirm the veteran's entitlement amount and eligibility to use the VA loan benefit
The COE verifies to the lender that the borrower meets military service requirements and documents their remaining VA entitlement for guaranty purposes.
An originator discovers that a borrower's employer cannot be reached to verify employment at the time of closing. What is the most appropriate next step?
Answer: Place the loan on hold and attempt alternative verification methods such as a CPA letter or IRS transcripts
If standard employer verification fails at closing, lenders should attempt alternative methods and delay closing if needed, as funding without employment verification creates fraud risk and agency guideline violations.