Mortgage Loan Origination Activities 4

Question 1

A borrower applies for a mortgage but provides falsified income documents. The MLO suspects fraud but submits the application anyway. Under federal law, this MLO could be charged with:

Accepted Answer

Mortgage fraud under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

Answer

A RESPA violation only

Answer

A minor ECOA infraction

Answer

A TILA disclosure violation only

Question 2

What is 'loan flipping' in the context of mortgage origination?

Accepted Answer

Repeatedly refinancing a borrower's loan primarily to generate fees rather than benefit the borrower

Answer

Selling a mortgage loan on the secondary market immediately after origination

Answer

Converting an adjustable-rate mortgage to a fixed-rate loan

Answer

Transferring servicing rights from one lender to another

Question 3

Under HMDA, which lenders are required to report mortgage data to federal regulators?

Accepted Answer

Depository institutions meeting asset thresholds and non-depository lenders meeting volume thresholds

Answer

Only federally chartered banks with assets over $500 million

Answer

All real estate brokers who facilitate mortgage referrals

Answer

Only lenders operating in metropolitan statistical areas (MSAs)

Question 4

During origination, what distinguishes a 'prequalification' from a 'preapproval'?

Accepted Answer

Prequalification is an informal estimate; preapproval involves verified documentation and underwriting review

Answer

Prequalification involves a hard credit pull; preapproval uses only a soft pull

Answer

Prequalification is issued only by banks; preapproval is issued by mortgage brokers

Answer

There is no legal distinction between the two terms

Question 5

A borrower wants to use gift funds for their entire down payment on a conventional loan. Which statement is correct?

Accepted Answer

Gift funds are permitted if accompanied by a gift letter and the donor is an acceptable source

Answer

Gift funds are never permitted on conventional loans

Answer

Gift funds require an additional 10% origination fee

Answer

Gift funds are only allowed if the loan-to-value is under 80%

Question 6

Which index is most commonly used as the benchmark for adjustable-rate mortgages (ARMs) originated today?

Accepted Answer

Secured Overnight Financing Rate (SOFR)

Answer

London Interbank Offered Rate (LIBOR)

Answer

11th District Cost of Funds Index (COFI)

Answer

Prime Rate published by the Wall Street Journal

Question 7

When an MLO originates a loan through a mortgage broker arrangement, who is the MLO's employer of record for SAFE Act licensing purposes?

Accepted Answer

The mortgage broker company (the sponsoring entity)

Answer

The wholesale lender funding the loan

Answer

The borrower, since the MLO represents their interests

Answer

The state licensing authority in the state of origination