Mortgage Loan Origination Activities

A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?

For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?

During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?

An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:

An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?

An MLO provides pre-qualification based on a borrower's current employment but learns the borrower is starting a new job next month with a $10,000 salary increase. How should this information be handled?

An MLO issues a pre-approval letter that states 'subject to satisfactory appraisal and final underwriting approval.' The borrower uses this letter to make an offer, but the appraisal comes in $15,000 below the purchase price. What is the lender's obligation?

A borrower submits a mortgage application on Monday at 2:00 PM. The lender determines the application is complete on Wednesday at 10:00 AM. What is the latest day the Loan Estimate must be delivered to comply with TRID requirements?

How long is a typical pre-approval letter valid?

A borrower requests a rate lock on a construction-to-permanent loan where the construction phase is 8 months and the permanent phase begins immediately after. The lender's rate lock policy allows maximum 120-day locks. How should the MLO handle this situation?

An MLO issues a pre-approval letter valid for 90 days. On day 85, the borrower's credit score drops 40 points due to a new credit inquiry and increased credit utilization. What should the MLO do?

A borrower provides a verbal income estimate of $80,000 annually during a pre-qualification call. The MLO later discovers through employment verification that the borrower's actual income is $65,000. What is the most appropriate next step?

Which of the following refinance scenarios would most likely FAIL to meet the tangible net benefit requirement?

In a renovation loan scenario, the borrower wants to remove a load-bearing wall to create an open floor plan. The structural engineer's report indicates this is feasible with proper reinforcement. What must happen before this work can proceed?

During a construction loan inspection, the lender discovers that the contractor has installed windows that do not meet the energy efficiency specifications outlined in the approved construction plans. The contractor claims the windows are 'equivalent quality.' What should the MLO advise?

A borrower requests that all loan communications be sent only to their workplace address because they are in the process of divorce and don't want their spouse to see mortgage-related documents. How should the MLO handle this request?

A borrower receives a gift of $25,000 from their employer as part of an employee assistance program. What documentation is required beyond the standard gift letter?

An MLO presents three loans to a borrower: a 30-year conventional at 4.0%, a 15-year conventional at 3.5%, and a 30-year FHA at 4.25%. All loans are in the lowest cost category within their respective loan types. Which statement about compliance is correct?

A borrower's credit score dropped 45 points between the initial application and final underwriting due to a new collection account. The borrower claims no knowledge of this debt. What is the MLO's best course of action?

A borrower has a mortgage with mortgage insurance and wants to refinance to eliminate it. The new loan rate is 0.125% higher, but removing MI saves $200/month. How should this be evaluated for tangible net benefit?

When a construction loan requires a 'two-party check' system for draw payments, this means:

A borrower has $50,000 in a joint account with their spouse who is not on the mortgage application. What documentation is typically required to use these funds?

Which of the following actions by a mortgage loan originator would violate the Appraiser Independence Requirements?

A lender provides a revised Loan Estimate due to a changed circumstance but fails to include the required changed circumstance disclosure. What is the consequence?

A lender establishes an appraisal management company (AMC) as a subsidiary. To maintain appraisal independence, the AMC must:

A borrower's loan application shows an estimated property value of $400,000. The appraisal comes back at $375,000, requiring a higher down payment. This occurs 5 days after the original Loan Estimate. What must the lender do?

An MLO discovers that a borrower's existing mortgage has a prepayment penalty of $12,000. The proposed refinance would save $150 per month in payments. What is the minimum payback period that would generally support tangible net benefit?

A borrower calls an MLO at 9 PM on a Friday requesting immediate disclosure of their APR calculation methodology for a loan they applied for earlier that week. The MLO has not yet provided the Loan Estimate. What is the MLO's obligation regarding this request?

What is the typical impact on a credit score when a borrower pays off and closes a credit card account that has been open for 10 years?

In construction lending, what is the primary purpose of requiring a completion bond or performance bond?

A borrower wants to compare an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. What is the MOST important disclosure the MLO must provide about the ARM?

For a self-employed borrower, which of the following would NOT be added back to net income when calculating qualifying income?

A borrower provides a lease agreement showing rental income of $2,500 per month, but the property has been vacant for the past 3 months. How should this rental income be treated?

When calculating qualifying income for a borrower who receives both W-2 wages and 1099 income, which approach is most appropriate?

A self-employed borrower's tax returns show the following: Year 1 net income $45,000, Year 2 net income $38,000. The borrower had $8,000 in depreciation expenses each year. What is the qualifying monthly income?

A borrower receives $1,800 monthly in rental income from a duplex they live in. What is the maximum amount that can typically be used for qualifying purposes?

A borrower owns a rental property that generates $2,000 monthly rent. The property expenses are $800 per month. How should this rental income be calculated for qualifying purposes?

A borrower's W-2 shows base salary of $50,000 plus $15,000 in overtime pay. The borrower has worked overtime consistently for 15 months. How should the overtime income be treated?

A borrower provides a W-2 showing gross income of $60,000 for the most recent year and $55,000 for the prior year. What is the appropriate method for calculating qualifying income?

A borrower receives W-2 income from their primary job and also operates a side business as a sole proprietorship that has shown losses for the past two years. When calculating qualifying income, the MLO should:

A borrower receives 1099-MISC income for consulting work but also has significant unreimbursed business expenses. These expenses should be:

A 1099 contractor has been working for the same company for 18 months but only has one year of tax returns filed as self-employed. To use this income for qualification, the MLO must:

A borrower owns a duplex and lives in one unit while renting the other. The rental income is $1,200 per month, but the borrower has no rental history or lease agreement. How should this income be treated?

A self-employed borrower's Schedule C shows gross receipts of $150,000 but net profit of only $25,000 due to high business expenses including meals, travel, and home office deductions. For mortgage purposes:

A self-employed borrower's tax returns show significant depreciation expenses that reduce their adjusted gross income. For mortgage qualification purposes, the MLO should:

A self-employed borrower shows increasing income over two years: Year 1 net income was $45,000 and Year 2 was $65,000. A CPA projects Year 3 income at $75,000. The qualifying income should be calculated as:

A borrower has rental income from a property that was their former primary residence. They moved out 8 months ago and have been renting it for 6 months. The rental income can be used if:

A borrower files joint tax returns with their spouse but is applying for the mortgage individually. The borrower's separate income shown on supporting documents differs from what can be determined from the joint return. The MLO should:

When a borrower receives a monetary gift from a relative for closing costs, which statement is most accurate regarding the gift letter requirements?

A borrower's 401(k) statement shows a current balance of $100,000. For reserve calculation purposes, what percentage of this balance can typically be counted as liquid assets?