Loan Origination Process 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 Process flashcards as text
What is the meaning of 'clear to close' (CTC) in the mortgage origination process?
Answer: The underwriter has satisfied all conditions and the loan is approved for closing
CTC means all underwriting conditions have been satisfied and the lender authorizes the closing agent to proceed with the loan closing.
Which document replaces the HUD-1 Settlement Statement and Good Faith Estimate for most residential mortgages originated after October 3, 2015?
Answer: Closing Disclosure and Loan Estimate under TRID
TRID replaced the HUD-1 and GFE with the Closing Disclosure and Loan Estimate respectively on October 3, 2015.
During origination, a borrower's employment is verified via a Verification of Employment (VOE). What specific information does the VOE typically confirm?
Answer: Current employment status, start date, position, and income
A VOE confirms the borrower's employer, start date, job title, base salary or hourly rate, and current employment status.
What is the function of 'discount points' that a borrower may pay at origination?
Answer: They are prepaid interest that permanently lowers the loan's interest rate
Each discount point equals 1% of the loan amount and is prepaid interest that reduces the note rate, typically by 0.25% per point.
A lender issues a 'revised Loan Estimate' to a borrower. Which of the following is a valid changed circumstance that allows this revision?
Answer: An Act of God causes the property to be damaged before closing
A natural disaster that damages the property is a valid changed circumstance allowing the lender to issue a revised Loan Estimate.
What is the primary risk to a lender when originating a loan without verifying the borrower's stated income?
Answer: Increased risk of borrower default due to income misrepresentation
Without income verification, borrowers who overstated their income may be unable to repay, dramatically increasing default risk for the lender.
In the origination process, which step directly follows the underwriter issuing a conditional approval?
Answer: The processor and borrower work to satisfy each outstanding condition
After a conditional approval, the processor coordinates with the borrower to gather documents that satisfy each underwriting condition before the file returns to underwriting for final sign-off.