SAFE - Certified Secure and Fair Enforcement Mortgage Loan Originator Loan Origination Activities Questions and Answers

Question 1

An MLO is working with a borrower on a refinance. During the application process, the borrower asks if they can waive the three-day right to rescind after closing because they need the funds immediately to pay for a medical emergency. What is the MLO's proper course of action?

Accepted Answer

Inform the borrower they can waive the right by providing a written statement detailing the bona fide personal financial emergency.

Answer

Under the Truth in Lending Act (TILA), the right to rescind on a primary residence refinance can be waived if the borrower has a bona fide personal financial emergency. The borrower must provide a dated written statement that describes the emergency and specifically waives the right to rescind. Pre-printed forms are not permitted for this purpose.

Question 2

According to the SAFE Act, which of the following activities is NOT considered part of 'taking a residential mortgage loan application'?

Accepted Answer

Responding to a consumer's general question about interest rates without collecting any borrower-specific information.

Answer

The SAFE Act defines 'taking an application' broadly to include receiving information to be used in a credit decision. However, simply responding to a consumer's request for information with a general quote or information, without collecting details for the purpose of extending credit, does not constitute taking an application.

Question 3

A loan originator is pre-qualifying a self-employed borrower who has been in business for 18 months. The borrower's income has been increasing steadily. Which of the following is the most appropriate action for the MLO to take when analyzing the borrower's income?

Accepted Answer

Average the income over the 18 months the business has been operating.

Answer

For self-employed borrowers with less than a two-year history, underwriting guidelines typically require the MLO to average the income over the period of self-employment (in this case, 18 months) to accurately assess the borrower's ability to repay. While a two-year history is standard, less than two years can be acceptable if other compensating factors exist and the income is stable or increasing.

Question 4

During the loan origination process, a mortgage loan originator is responsible for all the following activities EXCEPT:

Accepted Answer

Making the final credit decision to approve or deny the loan.

Answer

While a mortgage loan originator (MLO) collects and analyzes a borrower's financial information to pre-qualify them and helps them through the application process, the final decision to approve or deny the loan is made by the lender's underwriter. The MLO's role is to originate the loan, not to underwrite or approve it.

Question 5

A prospective borrower calls an MLO to inquire about a mortgage. The MLO gathers the borrower's name, Social Security Number, gross monthly income, the property address, an estimate of the property's value, and the desired loan amount. At this point, what is the MLO required to do?

Accepted Answer

Provide a Loan Estimate within three business days.

Answer

Once an MLO has received the six key pieces of information that constitute a loan application under the TILA-RESPA Integrated Disclosure (TRID) rule (Name, SSN, Income, Property Address, Estimated Value, Loan Amount), they are required to provide the borrower with a Loan Estimate within three business days.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

SAFE - Certified Secure and Fair Enforcement Mortgage Loan Originator Loan Origination Activities Questions and Answers