Loan Officer Flashcards

A Good Faith Estimate cannot be provided until a customer's complete application has been received. Which of the following answers DOES NOT constitute information sufficient to be considered a received application?

Answer: consumer's assets

Under RESPA, a "complete application" for a Good Faith Estimate (now Loan Estimate) requires six pieces of information: name, income, Social Security number, property address, estimated property value, and the mortgage loan amount sought. Consumer's assets, while important for underwriting, are not among these initial six required items to trigger the GFE/LE disclosure.

Which loans fall outside the Real Estate Settlement Procedures Act's (RESPA) exemptions?

Answer: a loan to finance a commercial warehouse

RESPA primarily applies to federally related mortgage loans secured by residential properties (1-4 unit dwellings). Loans for commercial properties, such as a commercial warehouse, are explicitly exempt from RESPA regulations. Reverse mortgages, home equity lines of credit, and mortgages for single-family homes are all covered by RESPA.

All of the following are included in the original escrow statement, EXCEPT:

Answer: the amount that is collected for homeowners association dues

An initial escrow statement details the estimated taxes, insurance premiums, and other charges (like mortgage insurance) that will be paid from the escrow account during the first 12 months. Homeowners association (HOA) dues are typically paid directly by the homeowner and are not usually collected and managed through a mortgage escrow account by the lender.

When is a notice of adverse action required?

Answer: when a counteroffer is extended, but the offer is rejected

A notice of adverse action is required under the Equal Credit Opportunity Act (ECOA) when a lender denies a loan application or makes a counteroffer that the applicant rejects. This notice informs the applicant of the reasons for the denial or the terms of the rejected counteroffer, ensuring transparency and fairness in lending decisions.

What aspect can be taken into account while assessing a loan application?

Answer: immigration status

The Equal Credit Opportunity Act (ECOA) prohibits discrimination based on protected characteristics like race, color, religion, national origin, sex, marital status, or age. However, a lender *can* inquire about and consider a borrower's immigration status, as it relates to their legal capacity to enter into contracts and their likelihood of remaining in the country to repay the loan.

Which form of income is not taken into account when reviewing a loan?

Answer: educational military benefits

Lenders assess income for its stability and likelihood of continuation to determine repayment capacity. While many forms of income can be considered if stable and documented, educational military benefits (like GI Bill housing allowances) are generally not considered stable, long-term income for loan qualification purposes as they are temporary and tied to enrollment.

What kind of property is covered by a right rescission?

Answer: a principal residence

The right of rescission, under the Truth in Lending Act (TILA), applies specifically to refinance transactions or home equity loans secured by a borrower's *principal residence*. It allows borrowers a three-business-day period to cancel the loan without penalty. This right does not apply to purchase money mortgages or loans secured by second homes or investment properties.