Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
Correct Answer
C) Document large or unusual deposits
Why this is correct: "Document large or unusual deposits" is a standard underwriting requirement. The lender must obtain a written explanation and evidence (like a gift letter or transfer documentation) for such deposits to verify the assets and assess the borrower's true financial position. Why the other choices are wrong: "Count gift funds without donor documentation or transfer evidence" is wrong because gift funds require a signed gift letter stating the funds are a true gift, not a loan, and evidence the funds have been transferred. "Use unexplained large deposits as verified assets" is wrong because unexplained deposits are not considered verified; they must be sourced to be acceptable for qualifying. "Ignore reserve requirements once the borrower has the minimum down payment" is wrong because reserve requirements (cash left over after closing) are often a separate loan program requirement and must be verified even if the down payment is covered. Exam tip: For any deposit that looks large compared to the borrower's normal income pattern, always ask: "Where did this money come from?" and get documentation.
Why This Is the Correct Answer
The correct response is "Document large or unusual deposits" because Asset verification confirms funds to close, reserves, large deposits, and gift documentation.
Why the Other Options Are Wrong
Option A: Count gift funds without donor documentation or transfer evidence.
This choice is a tempting shortcut, but it conflicts with asset verification because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option B: Use unexplained large deposits as verified assets.
This choice is not the best answer because it applies the wrong file step for asset verification; the governing rule is tested by the correct option.
Option D: Ignore reserve requirements once the borrower has the minimum down payment.
This choice is a tempting shortcut, but it conflicts with asset verification because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
asset verification: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For asset verification questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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
More Origination Questions
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?
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?
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A processor asks how to handle a file where a cost changes after the Closing Disclosure has already been provided. Which response is most accurate?
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