SAFE - Certified Secure and Fair Enforcement Mortgage Loan Originator Loan Processing and Underwriting Questions and Answers

Question 1

A borrower has a gross monthly income of $7,000.
Their proposed PITI is $2,100.
They also have a $500 monthly car payment, a $300 student loan payment, and a $100 minimum credit card payment.
What is their total (back-end) debt-to-income ratio?

Accepted Answer

42.9%

Answer

30%

Answer

35.7%

Answer

50%

Question 2

When an underwriter is reviewing a property appraisal for a purchase transaction, what is their primary objective?

Accepted Answer

To determine if the property represents acceptable collateral for the loan amount requested.

Answer

To verify the accuracy of the square footage listed in the public records.

Answer

To ensure the appraiser has included at least three comparable sales from the last 90 days.

Answer

To confirm that the borrower was charged a fair price for the appraisal service.

Question 3

An underwriter reviewing a borrower's bank statements notices a single, uncharacteristic cash deposit of $25,000 made last week. Which of the following actions is the underwriter most likely to take?

Accepted Answer

Request a signed letter of explanation from the borrower and documentation to source the funds.

Answer

Disregard the deposit since the funds have been in the account for more than three business days.

Answer

Immediately deny the loan due to a violation of anti-money laundering regulations.

Answer

Approve the loan but reduce the borrower's verified assets by $25,000.

Question 4

Which of the following BEST describes the function of an Automated Underwriting System (AUS) such as Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Product Advisor (LPA)?

Accepted Answer

It analyzes a loan application against investor guidelines to provide a preliminary risk assessment and credit recommendation.

Answer

It provides a legally binding loan approval that cannot be overturned by a human underwriter.

Answer

It automatically orders all necessary third-party services like the appraisal and title search.

Answer

It guarantees the accuracy of all information submitted on the loan application.

Question 5

A loan processor receives the Standard Flood Hazard Determination Form (SFHDF) for a property, which indicates it is located in a Special Flood Hazard Area (SFHA). What does this finding require?

Accepted Answer

The borrower must purchase and maintain flood insurance for the life of the loan.

Answer

The loan application must be automatically denied.

Answer

An additional in-person property inspection by a FEMA representative.

Answer

The lender must increase the interest rate by 0.25% to cover the additional risk.

Question 6

An underwriter is calculating the qualifying income for a self-employed borrower with a stable business for the past five years. The borrower's tax returns show a net profit of $90,000 two years ago and $110,000 last year. What is the standard method for calculating the borrower's qualifying monthly income?

Accepted Answer

Add the net profit from the two years and divide the total by 24.

Answer

Use the most recent year's income ($110,000) and divide by 12.

Answer

Use the lower of the two years' income ($90,000) and divide by 12.

Answer

Request a current year-to-date Profit & Loss statement and use that figure.

A borrower has a gross monthly income of $7,000.Their proposed PITI is $2,100.They also have a $500 monthly car payment, a $300 student loan payment, and a $100 minimum credit card payment.What is their total (back-end) debt-to-income ratio?

A borrower has a gross monthly income of $7,000.
Their proposed PITI is $2,100.
They also have a $500 monthly car payment, a $300 student loan payment, and a $100 minimum credit card payment.
What is their total (back-end) debt-to-income ratio?