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
What is the purpose of the 'three-day waiting period' before closing under TRID?
Answer: To give the borrower time to review the Closing Disclosure before consummation
TRID requires the Closing Disclosure to be received by the borrower at least 3 business days before loan consummation, giving them time to review final loan terms.
A borrower asks whether their loan officer can accept a cash gift from a real estate agent who referred them. Under RESPA Section 8, this arrangement is:
Answer: Prohibited as an illegal kickback for referrals of settlement services
RESPA Section 8 prohibits giving or accepting anything of value in exchange for referrals of settlement service business, making such a cash gift an illegal kickback.
Which of the following best describes 'subordination' in the context of mortgage origination?
Answer: A lien holder agreeing to allow its lien to remain in a junior position to a new first mortgage
Subordination is an agreement by a junior lien holder (e.g., a HELOC lender) to keep their lien in a subordinate position when a new first mortgage is originated or refinanced.
Under fair lending laws, which of the following constitutes 'redlining'?
Answer: A lender refusing to make loans or offering worse terms in neighborhoods based on race or national origin
Redlining is the illegal practice of denying credit or offering inferior terms based on the racial or ethnic composition of a neighborhood, violating the Fair Housing Act and ECOA.
A loan officer is completing a loan for a non-permanent resident alien with a valid work visa. Under standard agency guidelines, what document is typically required to verify their legal status?
Answer: USCIS Form I-94 or Employment Authorization Document (EAD)
Fannie Mae and FHA guidelines require non-permanent resident aliens to provide evidence of legal status such as a valid EAD (Form I-766) or Form I-94 showing authorized stay.
What does 'recasting' a mortgage mean, and when might it occur during origination planning discussions?
Answer: Re-amortizing the remaining loan balance after a large principal paydown to lower the monthly payment
Recasting (or re-amortization) re-calculates monthly payments based on the current balance after a substantial principal reduction, keeping the original rate and term but lowering the payment.
During origination, the appraisal comes in $15,000 below the purchase price on a conventional loan. Which statement best describes the lender's standard response?
Answer: The lender bases the LTV and loan amount on the lower appraised value, requiring the borrower to cover the gap
Lenders must use the lesser of the purchase price or appraised value to calculate LTV; if the appraisal is low, the borrower must increase their down payment or renegotiate the price to proceed.