SAFE Mortgage Loan Origination Processes 2 — Questions and Answers
Question 1: Under RESPA, within how many business days of receiving a complete loan application must a lender provide the Loan Estimate to the borrower?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
RESPA requires lenders to provide the Loan Estimate within 3 business days of receiving a completed loan application.
Question 2: A borrower's loan application is considered complete when all six pieces of information are collected. Which item is NOT one of the six required pieces?
- Social Security number
- Estimated property value
- Desired loan amount
- Employment history for past 5 years (Correct answer)
Correct answer: Employment history for past 5 years
The six required pieces for a complete application are: name, income, SSN, property address, estimated value, and loan amount — employment history is not one of them.
Question 3: What is the primary purpose of the pre-qualification process in mortgage loan origination?
- To issue a binding commitment to lend
- To provide an informal estimate of how much a borrower may be able to borrow (Correct answer)
- To verify all income and asset documentation
- To lock in the interest rate for the borrower
Correct answer: To provide an informal estimate of how much a borrower may be able to borrow
Pre-qualification provides an informal, non-binding estimate based on self-reported information and does not constitute a commitment to lend.
Question 4: Which of the following best describes a 'rate lock' in the mortgage origination process?
- A guarantee that the borrower's credit score will not change
- An agreement that fixes the interest rate for a specified period (Correct answer)
- A fee charged by the lender to process the application
- A requirement that the borrower refinance within a set time
Correct answer: An agreement that fixes the interest rate for a specified period
A rate lock is an agreement between a lender and borrower that guarantees a specific interest rate for a defined period, typically until closing.
Question 5: During loan processing, an MLO receives a verification of employment (VOE) showing the borrower was laid off two weeks ago. What is the most appropriate next step?
- Proceed with the loan since employment was valid at application
- Immediately close the loan before the lender finds out
- Notify the lender and underwriter of the material change in circumstances (Correct answer)
- Ask the borrower to find new employment before disclosing the change
Correct answer: Notify the lender and underwriter of the material change in circumstances
Material changes in a borrower's circumstances, such as job loss, must be disclosed to the lender and underwriter immediately to ensure accurate underwriting.
Question 6: The Closing Disclosure must be provided to the borrower at least how many business days before consummation?
- 1 business day
- 2 business days
- 3 business days (Correct answer)
- 5 business days
Correct answer: 3 business days
Under TRID rules, the Closing Disclosure must be received by the borrower at least 3 business days before loan consummation.
Question 7: Which document replaces both the HUD-1 Settlement Statement and the final Truth-in-Lending disclosure for most mortgage transactions closed after October 2015?
- Loan Estimate
- Closing Disclosure (Correct answer)
- Good Faith Estimate
- Annual Percentage Rate Notice
Correct answer: Closing Disclosure
The Closing Disclosure replaced the HUD-1 Settlement Statement and final TIL disclosure as part of the TRID (Know Before You Owe) rule effective October 3, 2015.
SAFE Mortgage Loan Origination Processes 2
Under RESPA, within how many business days of receiving a complete loan application must a lender provide the Loan Estimate to the borrower?