A borrower's credit score dropped 45 points between the initial application and final underwriting due to a new collection account. The borrower claims no knowledge of this debt. What is the MLO's best course of action?
Correct Answer
D) Obtain a letter of explanation and consider the impact on qualification
The MLO must use the most recent credit information for underwriting. While the borrower can dispute the collection, the current credit profile must be used for qualification. A letter of explanation should be obtained, and the lender will determine if the loan can proceed or if dispute resolution is required.
Why This Is the Correct Answer
The MLO must use the most recent credit information for underwriting. While the borrower can dispute the collection, the current credit profile must be used for qualification. A letter of explanation should be obtained, and the lender will determine if the loan can proceed or if dispute resolution is required.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
An MLO provides pre-qualification based on a borrower's current employment but learns the borrower is starting a new job next month with a $10,000 salary increase. How should this information be handled?
An MLO issues a pre-approval letter that states 'subject to satisfactory appraisal and final underwriting approval.' The borrower uses this letter to make an offer, but the appraisal comes in $15,000 below the purchase price. What is the lender's obligation?
A borrower submits a mortgage application on Monday at 2:00 PM. The lender determines the application is complete on Wednesday at 10:00 AM. What is the latest day the Loan Estimate must be delivered to comply with TRID requirements?
How long is a typical pre-approval letter valid?
A borrower requests a rate lock on a construction-to-permanent loan where the construction phase is 8 months and the permanent phase begins immediately after. The lender's rate lock policy allows maximum 120-day locks. How should the MLO handle this situation?
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Previous Question
An MLO presents three loans to a borrower: a 30-year conventional at 4.0%, a 15-year conventional at 3.5%, and a 30-year FHA at 4.25%. All loans are in the lowest cost category within their respective loan types. Which statement about compliance is correct?
Next Question
A borrower wants to use a construction-to-permanent loan to build a custom home on land they already own free and clear. During the construction phase, the borrower discovers significant rock formations requiring expensive excavation that will increase costs by $75,000. What is the most likely consequence?