CMP - Certified Mortgage Processor Loan Processing Fundamentals Questions and Answers — Questions and Answers
Question 1: According to the TILA-RESPA Integrated Disclosure (TRID) rule, when must the initial Loan Estimate be provided to a mortgage applicant?
- Within 3 business days of the lender's receipt of the loan application. (Correct answer)
- At the time of the loan application submission.
- Within 7 business days before the loan consummation.
- At least 10 business days prior to closing.
Correct answer: Within 3 business days of the lender's receipt of the loan application.
The TRID rule mandates that lenders must deliver or place in the mail the initial Loan Estimate to the consumer no later than the third business day after receiving the consumer's completed loan application.
Question 2: A loan processor is calculating a borrower's back-end debt-to-income (DTI) ratio. The borrower has a gross monthly income of $6,000. Their proposed monthly mortgage payment (PITI) is $1,800. They also have a $400 monthly car payment and a $200 minimum monthly credit card payment. What is the borrower's back-end DTI?
- 30%
- 37%
- 40% (Correct answer)
- 45%
Correct answer: 40%
The back-end DTI is calculated by dividing the total monthly debt payments (including the new mortgage) by the gross monthly income. In this case: ($1,800 PITI + $400 car payment + $200 credit card payment) / $6,000 = $2,400 / $6,000 = 0.40, or 40%.
Question 3: Which of the following is the primary purpose of the IRS Form 4506-C in the mortgage loan process?
- To report the borrower's income directly to the IRS.
- To request a copy of the borrower's complete tax return.
- To authorize the lender to obtain transcripts of the borrower's tax returns from the IRS for income verification. (Correct answer)
- To apply for a federal tax identification number for the property.
Correct answer: To authorize the lender to obtain transcripts of the borrower's tax returns from the IRS for income verification.
The IRS Form 4506-C is signed by the borrower to give the lender permission to request tax return transcripts directly from the IRS. This is a crucial step for verifying the income stated on the loan application.
Question 4: A mortgage broker refers a client to a title company and in return, the title company provides the broker with free marketing flyers and pays for their client appreciation event. This arrangement is a potential violation of which federal regulation?
- Truth in Lending Act (TILA)
- Fair Housing Act (FHA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Equal Credit Opportunity Act (ECOA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of RESPA prohibits giving or receiving any fee, kickback, or thing of value in exchange for the referral of settlement service business. The free marketing materials and event funding would be considered a 'thing of value' in exchange for the referral, which is a direct violation.
Question 5: Under the CFPB's rules, after the initial Closing Disclosure is delivered to the borrower, a new three-business-day waiting period is triggered if which of the following changes occurs?
- A typographical error is corrected in the property address.
- The annual percentage rate (APR) becomes inaccurate. (Correct answer)
- The seller's closing costs increase slightly.
- The date of the first payment changes by one day.
Correct answer: The annual percentage rate (APR) becomes inaccurate.
A new three-day waiting period for the Closing Disclosure is required for three specific changes: 1) the APR becomes inaccurate (generally a change of more than 1/8th of a percent for a fixed-rate loan), 2) a prepayment penalty is added to the loan, or 3) the basic loan product changes (e.g., from a fixed-rate to an adjustable-rate mortgage).
Question 6: Which of the following is a core responsibility of a mortgage loan processor?
- Making the final decision to approve or deny the loan.
- Ordering and reviewing the property appraisal. (Correct answer)
- Negotiating the interest rate with the borrower.
- Marketing loan products to potential applicants.
Correct answer: Ordering and reviewing the property appraisal.
A loan processor's role involves gathering and verifying all necessary documentation for the loan file, which includes ordering third-party services like appraisals and title reports, and reviewing them for completeness and accuracy before submitting the file to underwriting for a final decision.
CMP - Certified Mortgage Processor Loan Processing Fundamentals Questions and Answers
According to the TILA-RESPA Integrated Disclosure (TRID) rule, when must the initial Loan Estimate be provided to a mortgage applicant?