A processor asks how to handle a file where a processor wants to omit known monthly obligations from underwriting. Which response is most accurate?
Correct Answer
A) Consider payment obligations, debts, income, and credit history
Why this is correct: This question tests the same core concept as the previous one. Under the ATR rule (the governing federal rule, a lender must make a reasonable, good-faith determination considering multiple verified factors, including the borrower's current payment obligations, debts, income, and credit history. Omitting known obligations is never permissible. The correct response, "Consider payment obligations, debts, income, and credit history," is the only action that aligns with this comprehensive underwriting requirement. Why the other choices are wrong: "Use an outdated credit report after new debt is disclosed" is wrong because ATR requires the use of the most recent, verified information; using outdated data is not reasonable. "Treat disputed accounts as irrelevant without following program or investor requirements" is wrong because disputed accounts may still affect repayment ability and must be evaluated per specific rules. "Ignore a recent inquiry because the borrower says no new account was opened" is wrong because recent inquiries require follow-up verification; they cannot be ignored based solely on the borrower's statement. Exam tip: When you see "omit known obligations" in a question, the correct answer will always involve a full, verified analysis. The ATR rule does not allow for shortcuts.
Why This Is the Correct Answer
The correct response is "Consider payment obligations, debts, income, and credit history". ATR is a multi-factor repayment analysis that includes obligations, income, and credit history.
Why the Other Options Are Wrong
Option B: Use an outdated credit report after new debt is disclosed.
This choice is not the best answer because it applies the wrong file step for credit evaluation; the governing rule is tested by the correct option.
Option C: Treat disputed accounts as irrelevant without following program or investor requirements.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Ignore a recent inquiry because the borrower says no new account was opened.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
If the stem lists debts or simultaneous payments, bring them into ATR.
Exam Tip
For credit evaluation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Credit score alone does not satisfy the ATR factor analysis.
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