A processor asks how to handle a file where a HELOC will provide funds for the down payment on the same dwelling. Which response is most accurate?
Correct Answer
C) Include the HELOC payment in the ATR analysis
Why this is correct: The accurate handling is dictated by the Ability-to-Repay rule for simultaneous loans. Under 12 CFR 1026.43(c)(2)(iv) and (c)(6), the payment for a HELOC taken out to fund the down payment on the same property is a known debt and must be included in the monthly obligations analyzed for repayment ability. Thus, the most accurate response is to "Include the HELOC payment in the ATR analysis." Why the other choices are wrong: "Use business funds for closing without documenting access and impact on the business" is wrong because it violates asset verification rules for business funds. "Treat borrowed funds as verified cash to close without considering program restrictions" is wrong because many loan programs have restrictions on using borrowed funds for the down payment, and they must be considered. "Accept a screenshot balance without identifying the account owner or source" is wrong because it fails the basic requirements for asset verification, which include identifying the source and ownership of funds. Exam tip: When a down payment comes from a loan, you have two key tasks: 1) Verify the asset transfer (the funds), and 2) Account for the new liability (the payment) in the ATR analysis. Both are required.
Why This Is the Correct Answer
The correct response is "Include the HELOC payment in the ATR analysis" because Lines 207-214; 12 CFR 1026.43(c)(2)(iv) and 1026.43(c)(6).
Why the Other Options Are Wrong
Option A: Use business funds for closing without documenting access and impact on the business.
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: Treat borrowed funds as verified cash to close without considering program restrictions.
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 D: Accept a screenshot balance without identifying the account owner or source.
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
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