A new originator describes the VA programme to a client as government insurance the borrower buys, like a mortgage insurance policy in the borrower’s name. What is wrong with the description?
Correct Answer
A) Recognize VA guarantees the lender against covered loss
Why this is correct: The VA guaranty is a key feature of the program where the VA pledges to pay the lender a portion of the loan balance if the borrower defaults. This reduces the lender's risk. Why the other choices are wrong: "Apply conventional PMI rules instead of VA program requirements" is wrong because VA loans have a funding fee, not monthly PMI. "Treat the VA guaranty as a substitute for occupancy verification" is wrong because owner-occupancy is a separate VA loan requirement that must still be verified. "Apply the closing disclosure timing rule even though the file is testing Government mortgage program basics VA" is wrong because it introduces an irrelevant TRID timing rule when the question is specifically about the VA guaranty's function. Exam tip: Stick to the specific question. If the stem asks about the VA guaranty, the answer is about lender protection.
Why This Is the Correct Answer
The correct response is "Recognize VA guarantees the lender against covered loss" because Lines 143-149; VA Buyer Guide, Overview and Eligibility sections.
Why the Other Options Are Wrong
Option B: Apply conventional PMI rules instead of VA program requirements.
Apply conventional PMI rules instead of VA program requirements. is not correct because it does not apply the rule tested by this file scenario.
Option C: Treat the VA guaranty as a substitute for occupancy verification.
Treat the VA guaranty as a substitute for occupancy verification. is not correct because it does not apply the rule tested by this file scenario.
Option D: Apply the closing disclosure timing rule even though the file is testing Government mortgage program basics VA.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
VA loan eligibility and occupancy: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to VA loan eligibility and occupancy; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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The MLO compares the file facts with Government Loan Programs during an underwriting condition review. Which conclusion is accurate?
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