Mortgage Loan Origination Activities 3

Question 1

When a lender issues a loan commitment, what does this document signify?

Accepted Answer

The lender has agreed to fund the loan subject to specified conditions

Answer

A loan commitment is a formal lender agreement to fund the mortgage, typically contingent on conditions such as a satisfactory appraisal and clear title.

Question 2

The Equal Credit Opportunity Act (ECOA) requires a lender to notify an applicant of a credit decision within how many days of receiving a completed application?

Accepted Answer

30 days

Answer

ECOA requires creditors to notify applicants of action taken on a credit application within 30 days of receiving a completed application.

Question 3

A lender's underwriter requests additional documentation 10 days after receiving a loan file. What is this request called?

Accepted Answer

A stipulation or condition of approval

Answer

Requests for additional items needed before loan approval are called stips or conditions of approval, and must be satisfied before closing.

Question 4

Which federal law prohibits lenders from denying mortgage loans based on the racial or ethnic composition of a neighborhood?

Accepted Answer

Fair Housing Act (FHA)

Answer

The Fair Housing Act prohibits redlining and discrimination in residential lending based on race, color, national origin, religion, sex, familial status, or disability.

Question 5

During origination, a lender 'locks' a borrower's interest rate. If rates drop significantly before closing, the borrower typically:

Accepted Answer

May pay a float-down fee to access the lower rate if the lock includes a float-down option

Answer

Standard rate locks fix the rate for the lock period; borrowers can only benefit from rate drops if they purchased a float-down option at lock.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Loan Origination Activities 3