Banking Mortgage Banking 3

Question 1

What is the purpose of a home appraisal in the mortgage origination process?

Accepted Answer

To provide the lender with an independent estimate of the property's market value

Answer

An appraisal gives the lender an independent, professional opinion of market value to confirm the collateral is sufficient to secure the requested loan amount.

Question 2

Under the Equal Credit Opportunity Act (ECOA), lenders are prohibited from discriminating in credit decisions based on which factors?

Accepted Answer

Race, color, religion, national origin, sex, marital status, or age

Answer

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.

Question 3

What does mortgage underwriting involve?

Accepted Answer

Evaluating a borrower's credit, income, assets, and the property to determine loan approval and terms

Answer

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.

Question 4

What does the Home Mortgage Disclosure Act (HMDA) require covered lenders to do?

Accepted Answer

Collect and publicly report data on mortgage applications, originations, and denials

Answer

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.

Question 5

Under the TRID rule, what is the Closing Disclosure (CD) and when must it be provided?

Accepted Answer

A final statement of actual loan terms and closing costs provided at least 3 business days before settlement

Answer

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.

Banking Practice Test

Banking Practice Test

Banking Mortgage Banking 3