A borrower with $61,000 of documented salary also expects the home to appreciate about $20,000 in the first year and offers that as support for a larger loan. May the lender count the home's projected appreciation as income or assets when evaluating ability to repay?
Correct Answer
D) The $20,000 cannot count: the value of the dwelling is expressly excluded
The rule requires the creditor to consider current or reasonably expected income or assets other than the value of the dwelling that secures the loan. Lending against the property's expected appreciation is the practice the exclusion exists to stop. Other choices: an appraisal establishes present value, not future income; a borrower's statement cannot convert an excluded item into an included one; and a low loan-to-value ratio may reduce the lender's risk without changing what may be counted as repayment ability. Source: 12 CFR 1026.43(c)(2)(i)
Why This Is the Correct Answer
The rule requires the creditor to consider current or reasonably expected income or assets other than the value of the dwelling that secures the loan. Lending against the property's expected appreciation is the practice the exclusion exists to stop. Other choices: an appraisal establishes present value, not future income; a borrower's statement cannot convert an excluded item into an included one; and a low loan-to-value ratio may reduce the lender's risk without changing what may be counted as repayment ability. Source: 12 CFR 1026.43(c)(2)(i)
More Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
Between the Loan Estimate and closing, prepaid interest increases $180, homeowner insurance increases $95, transfer taxes increase $40, and a credit report fee for which the consumer could not shop increases $12. There is no valid revised estimate or other exception. Which increases violate TRID's zero-tolerance rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
A construction-to-permanent loan will convert to a substantially higher fully amortizing payment. Which payment is especially important when assessing the borrower's long-term repayment capacity?
A construction-to-permanent note states that conversion requires completion, a certificate of occupancy, and no unresolved liens. Construction is finished, but a mechanic's lien remains. What should happen?
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