Mortgage Banking Flashcards
7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Banking flashcards as text
What is the purpose of a home appraisal in the mortgage origination process?
Answer: To provide the lender with an independent estimate of the property's market value
An appraisal gives the lender an independent, professional opinion of market value to confirm the collateral is sufficient to secure the requested loan amount.
Under the Equal Credit Opportunity Act (ECOA), lenders are prohibited from discriminating in credit decisions based on which factors?
Answer: Race, color, religion, national origin, sex, marital status, or age
ECOA prohibits discrimination in any aspect of a credit transaction based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
What does mortgage underwriting involve?
Answer: Evaluating a borrower's credit, income, assets, and the property to determine loan approval and terms
Underwriting is the risk-assessment process where a lender analyzes the 'three Cs' — credit, capacity, and collateral — to decide whether to approve a loan and on what terms.
What does the Home Mortgage Disclosure Act (HMDA) require covered lenders to do?
Answer: Collect and publicly report data on mortgage applications, originations, and denials
HMDA requires covered institutions to collect, report, and disclose loan-level data on mortgage applications so regulators and the public can identify potential fair lending violations.
Under the TRID rule, what is the Closing Disclosure (CD) and when must it be provided?
Answer: A final statement of actual loan terms and closing costs provided at least 3 business days before settlement
The Closing Disclosure replaces the HUD-1 Settlement Statement and must be delivered to the borrower at least 3 business days before the loan closing date.
What does the mortgage loan origination process encompass?
Answer: Taking a borrower's application and processing it through underwriting to final loan closing
Origination covers the entire lifecycle of creating a new mortgage, from the initial application through processing, underwriting, approval, and closing.
Under the Truth in Lending Act (TILA), what does the Annual Percentage Rate (APR) represent?
Answer: A standardized cost measure that includes the interest rate plus certain fees, expressed as a yearly rate
APR incorporates the note rate plus certain prepaid finance charges (such as origination points and mortgage insurance) into a single annualized rate, enabling borrowers to compare true loan costs across lenders.