CRU Client Advisory & Consultation 3

Question 1

Under ECOA, within how many days must a lender provide an adverse action notice to a denied applicant?

Accepted Answer

30 days

Answer

ECOA requires lenders to provide a statement of specific reasons for adverse action within 30 days of a completed application.

Question 2

A borrower's debt-to-income ratio is 46% on a conventional loan file. Which advisory action is most appropriate?

Accepted Answer

Advise the borrower their DTI may require compensating factors or a different loan product, as conventional loans typically cap at 45%

Answer

Most conventional guidelines cap DTI at 45% (some allow 50% with strong compensating factors), so the underwriter should discuss options or compensating factors with the borrower.

Question 3

A client asks about the difference between a fixed-rate and an adjustable-rate mortgage in terms of long-term risk. What is the most accurate advisory statement?

Accepted Answer

A fixed-rate mortgage offers payment certainty, while an ARM may offer a lower initial rate but exposes the borrower to rate increases after the initial period

Answer

Fixed-rate loans provide payment stability, while ARMs offer initial savings but carry interest rate risk after the fixed period ends.

Question 4

Which situation would trigger the right of rescission under the Truth in Lending Act?

Accepted Answer

A borrower refinancing their primary residence with a new lender

Answer

TILA's three-day right of rescission applies to refinances of primary residences with a new lender, giving borrowers time to cancel without penalty.

Question 5

A borrower is considering using gift funds for their down payment. What must the underwriter verify and advise the client about?

Accepted Answer

A gift letter must confirm the funds are not a loan, and the donor and transfer must be documented per loan program guidelines

Answer

Loan guidelines require a signed gift letter stating no repayment is expected, plus documentation of the donor's ability to give and the transfer of funds.

(CRU) Certified Residential Underwriter Practice Test

(CRU) Certified Residential Underwriter Practice Test

CRU Client Advisory & Consultation 3