During an advertising approval, a loan file reviewer identifies an issue involving sponsorship and employment status. Which response is most compliant?
Correct Answer
C) Include known debts in repayment analysis
Why this is correct: The core concept of credit evaluation is to assess a borrower's ability to repay based on a complete and accurate financial picture. This includes all known, verified debts. Including known debts in the repayment analysis is the only compliant action listed, as it ensures the underwriting decision is based on the borrower's true financial obligations. Why the other choices are wrong: Using an outdated credit report after new debt is disclosed is wrong because it fails to use current, verified information. Treating disputed accounts as irrelevant without following program or investor requirements is wrong because specific rules govern how disputed accounts must be handled. Ignoring a recent inquiry because the borrower says no new account was opened is wrong because the inquiry itself is part of the credit history and must be considered, even if no account resulted. Exam tip: In credit evaluation, the rule is to analyze all verified information. Any action that ignores known, relevant financial data is non-compliant.
Why This Is the Correct Answer
The correct response is "Include known debts in repayment analysis" because Credit evaluation uses verified credit, debts, history, and repayment ability.
Why the Other Options Are Wrong
Option A: Use an outdated credit report after new debt is disclosed.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 B: 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
credit evaluation: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For credit evaluation 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
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