Three days before closing a borrower mentions she financed $18,000 of furniture last week. The file was approved at a 41% total debt ratio. What should the originator do with the newly disclosed furniture debt before closing?
Correct Answer
B) Disclose it to underwriting: the ratio has to be recalculated before closing
A new $18,000 obligation changes the ratio the approval rested on, and the originator now knows about it, so it goes to underwriting. Other choices: an approval is conditioned on the facts staying as represented; waiting for a post-closing audit means funding a loan on a ratio known to be wrong; and delaying a delivery does nothing about a debt that already exists. Source: Undisclosed debt and the duty to re-underwrite
Why This Is the Correct Answer
A new $18,000 obligation changes the ratio the approval rested on, and the originator now knows about it, so it goes to underwriting. Other choices: an approval is conditioned on the facts staying as represented; waiting for a post-closing audit means funding a loan on a ratio known to be wrong; and delaying a delivery does nothing about a debt that already exists. Source: Undisclosed debt and the duty to re-underwrite
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A branch pays its originators 1.1% of the loan amount on every file, and an extra $400 whenever the loan closes with an escrow waiver. Escrow waivers at this branch are granted only on loans priced above par, and the originator decides whether to offer one. Under Regulation Z, which part of this compensation arrangement, if any, is prohibited?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
A borrower pays a mortgage broker $3,400 directly at closing. The lender also offers the same brokerage 1.5% of the loan amount as a lender-paid credit on the same file. Under Regulation Z's dual-compensation rule, may the brokerage accept both payments on this transaction?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
A residential mortgage lender files a suspicious activity report about a borrower on 8 April. On 15 April the borrower calls to ask why the file has stalled, and the branch manager wants to tell him a report was filed so he can explain himself. May the manager tell the borrower that a suspicious activity report was filed?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
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A branch sends its closed-loan list, including borrower names and loan amounts, to a marketing firm that will mail refinance offers. The firm is not affiliated with the lender. What was required first?
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During a disclosure desk review, a quality-control reviewer encounters an ethics and Honest Dealing issue. Which response should choose the compliant next step?