Processing and Underwriting Flashcards
7 cards from real SAFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Processing and Underwriting flashcards as text
What is the role of a mortgage loan processor in the origination pipeline?
Answer: To collect and organize documentation to prepare the file for underwriting
The processor's primary role is to gather required documentation, verify its completeness, and assemble the loan file so the underwriter can make a credit decision.
What is 'rescission' in the context of mortgage loans?
Answer: A borrower's right to cancel certain refinance transactions within three business days
Under TILA's right of rescission, borrowers have three business days to cancel a refinance on their primary residence (not applicable to purchases).
What does 'Clear to Close' (CTC) signal in the mortgage process?
Answer: The underwriter has satisfied all conditions and the loan is approved for closing
CTC means the underwriter has reviewed and approved all outstanding conditions and the loan file is ready to proceed to closing.
Which credit repository model is most commonly used in mortgage underwriting for a tri-merge report?
Answer: The middle score of the three bureaus
Underwriters use the middle score from a tri-merge report (Equifax, Experian, TransUnion); if two borrowers apply, the lower of the two middle scores is used.
A borrower wants to use gift funds for a down payment on a conventional loan. What is typically required?
Answer: A gift letter stating no repayment is required, plus documentation of the transfer
Conventional guidelines allow gift funds for down payment but require a signed gift letter confirming no repayment obligation and documentation showing the funds transferred.
What is the difference between an appraisal and a home inspection in mortgage processing?
Answer: An appraisal determines market value for the lender; an inspection evaluates condition for the buyer
An appraisal is a lender-required valuation to confirm collateral value, while a home inspection is a buyer-elected evaluation of the property's physical condition.
Under RESPA, what is a 'kickback' and how does it affect mortgage processing?
Answer: An illegal payment between settlement service providers for referrals
RESPA Section 8 prohibits kickbacks—unearned fees or payments exchanged between settlement service providers for referring business—as they inflate borrower costs.