Mortgage Loan Origination Activities 5

Question 1

A lender is calculating a borrower's debt-to-income (DTI) ratio for loan origination. Which of the following debts is correctly included in the back-end DTI?

Accepted Answer

The proposed housing payment plus all monthly installment and revolving debt obligations

Answer

The back-end (total) DTI includes the proposed housing payment (PITI) plus all other recurring monthly debt obligations such as car loans, student loans, credit cards, and other installment debts.

Question 2

What is the purpose of the Closing Disclosure (CD) in the loan origination process?

Accepted Answer

To provide the borrower with final loan terms and closing costs at least 3 business days before consummation

Answer

The Closing Disclosure provides the borrower with final, actual loan terms and costs and must be delivered at least 3 business days before loan consummation under TRID.

Question 3

Under anti-steering provisions of the Dodd-Frank Act, an MLO is prohibited from directing a borrower to a loan primarily because it:

Accepted Answer

Generates greater compensation for the MLO than other loans the borrower qualifies for

Answer

Anti-steering rules prohibit MLOs from recommending a loan product primarily because it pays the originator more, rather than because it is in the borrower's interest.

Question 4

A borrower is self-employed. Which documents are typically required to verify self-employment income during origination?

Accepted Answer

Two years of personal and business tax returns, year-to-date P&L, and business bank statements

Answer

For self-employed borrowers, agency guidelines require two years of personal and business tax returns, a year-to-date profit and loss statement, and often business bank statements to verify income stability.

Question 5

What is the 'three-day rescission period' in residential mortgage lending?

Accepted Answer

The right of a borrower to cancel a refinance on their primary residence within 3 business days of closing

Answer

Under TILA's right of rescission, a borrower may cancel a refinance on their principal dwelling within 3 business days of closing, receipt of the Notice of Right to Cancel, or receipt of all material disclosures, whichever is latest.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Loan Origination Activities 5