Loan Origination Process Flashcards
7 cards from real CMA 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
In the mortgage origination process, what does 'lock-in' or 'rate lock' mean?
Answer: The lender guarantees a specific interest rate for a defined period while the loan is processed
A rate lock is a lender's commitment to hold a specific interest rate and points for a borrower for a set period, typically 30–60 days, while the loan is processed.
Which anti-predatory lending law requires loan originators to make a reasonable, good-faith determination that a borrower has the ability to repay a mortgage?
Answer: Dodd-Frank Act / ATR Rule
The Dodd-Frank Act's Ability-to-Repay (ATR) rule, implemented by the CFPB under Regulation Z, requires lenders to verify a borrower's ability to repay before making a residential mortgage loan.
A borrower applies for a mortgage. The lender discovers a recent 30-day late payment on an auto loan. Which part of the origination process is this finding most relevant to?
Answer: Creditworthiness evaluation in underwriting
Late payment history directly impacts credit risk evaluation during underwriting, where the underwriter assesses whether the borrower meets the program's credit requirements.
What is the role of a mortgage broker versus a mortgage banker in the loan origination process?
Answer: Brokers arrange loans between borrowers and lenders without funding; bankers originate and fund loans with their own or warehouse capital
A mortgage broker acts as an intermediary matching borrowers with lenders but does not fund the loan, while a mortgage banker originates and funds loans using its own capital or warehouse lines.
Which of the following best describes a 'conditional approval' issued by an underwriter?
Answer: The loan is approved subject to the borrower satisfying specific outstanding conditions
A conditional approval means the underwriter approves the loan in principle but requires additional documentation or resolution of specific items before final approval.
Under the SAFE Act, which of the following individuals is required to obtain an NMLS license as a Mortgage Loan Originator?
Answer: An independent mortgage broker who takes residential loan applications for compensation
The SAFE Act requires non-depository MLOs (independent brokers and non-bank loan officers) to obtain state licenses through NMLS, while bank employees register rather than license.
What is 'warehousing' in the context of mortgage origination?
Answer: A short-term credit facility a mortgage banker uses to fund loans before selling them to the secondary market
A warehouse line of credit is a short-term revolving credit facility used by mortgage bankers to fund closed loans until they are sold to investors in the secondary market.