Chapter 6: The Loan Application Flashcards
Which of the following is consider an Application and triggers loan Disclosures?
A. someone reaches you by phone and starts asking questions
B. A customer receives a pre-qualification letter and wants to know the basics
C. a creditor analyzes a prospective borrower’s pre-approval request and denies the loan due to a bankruptcy on the credit report
D. A person walks in and makes an had a discussion about available loan products and financing terms
Answer C
Which of the following is true of an inquiry?
A. It is considered an application and disclosure should be sent out
B. It is not considered an application and no disclosure is needed
C. It is an application but no disclosure needed
D. It is only an application after the user picks a mortgage product.
Answer B
It is considered an inquiry not an application.
According to the Equal Credit Opportunity Act, an inquiry is a discussion about available loan products and financing terms and not an application and doesn’t result in a loan originator’s approval or denial of a loan; therefore, no disclosures are needed.
A creditor analyzes a prospective borrower’s pre-approval request and denies the loan due to a bankruptcy on the credit report, this has to be considered as
A. An Inquiry and do not need to send out disclosure.
B. an application and an adverse action notice must be delivered.
C. A pre-approval request and thus, an application and adverse notice required
D. between the borrower and lender who sent the letter.
Answer B
Answer B
if a creditor analyzes a prospective borrower’s pre-approval request and denies the loan due to a bankruptcy on the credit report, this has to be considered as an application and an adverse actionnotice must be delivered.
A pre-qualification is an inquiry and not an application if it
A. doesn’t result in a loan originators approval or denial of a loan; therefore, no disclosures are needed
B. Result in a loan originators approval of the loan
C. Result in a loan originators denial of the loan
D. Denied due to bankruptcy
Answer A
A pre-qualification request is an inquiry and not an application and doesn’t result in a loanoriginator’s approval or denial of a loan; therefore, no disclosures are needed.
Which of the following is true regarding pre-approval letters?
A. It is legally binding
B. It is only legally binding if lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term and expiration date,
C. It is not legally binding and considered an inquiry
D. It does not trigger adverse notice
Answer B
if the lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term and expiration date, this is a legally binding commitment.
When does a pre-approval letters trigger a LE?
A. If it is legally binding
B. It is only legally binding
C. if lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term expiration date
C. If lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term expiration date, and property address.
D. If It does not trigger adverse notice
Answer C
A pre-approval ALWAYS trigger an LE If lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term expiration date, and PROPERTY ADDRESS
What happens if lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term expiration date but no property address is listed?
A. If there is no property
address, company policy determines whether or not a Loan Estimate is delivered.
B. If there is no property
address, MLO determines whether or not a Loan Estimate is delivered.
C. If there is no property
address, the customer determines whether or not a Loan Estimate is delivered.
D. The loan is void and a revised LE is needed
Answer A
if the lender chooses to write a pre-approval letter, stating the loan amount, interest rate, product type, term and expiration date, this is a legally binding commitment.
If there is a property address, a Loan Estimate is definitely triggered.
If there is NO property address, company policy determines whether or not a Loan Estimate is delivered.
Which of the following is true of RESPA Disclosures?
A. RESPA Special Information booklet, mortgage servicing disclosure and a list of housing counseling agencies only need to be delivered at the same time that they receive the additional qualifying financial documents.
B. RESPA Special Information booklet, mortgage servicing disclosure and a list of housing counseling agencies only need to be delivered before the creditor receives the application
C. Special Information booklet, mortgage servicing disclosure and a list of housing counseling agencies only need to be delivered after the creditor receives the application AND the additional qualifying financial documents.
D. RESPA Special Information booklet, mortgage servicing disclosure and a list of housing counseling agencies only need to be delivered at the the time creditor receives the application
Answer C
RESPA Special Information
booklet, mortgage servicing disclosure and a list of housing counseling
agencies only need to be delivered AFTER the creditor receives the application AND the additional qualifying financial documents.
When does an inquiry becomes a application?
A. When the customer permits the MLO to do so
B. When the MLO receives the name, number, address, SS, and loan
C. When the MLO receives the customer name, SS, monthly income, property address and loan amount sought
D. When the MLO receives the customer name, SS, credit information, property address and loan amount sought
Answer C
An inquiry becomes a loan application (either verbally or in writing) when itincludes all six of the following items:
Consumer name, consumer SS, consumer income, property address with zip, estimated value of property and estimated amount of mortgage loan
For ECOA purposes, an inquiry also becomes an application that requires an adverse action notice if
A. The lender denies the loan, regardless of information received
B. The lender denies the loan, depending on information received
C. The borrower brings a copy of credit report
D. The MLO spoke to the consumer
Answer A
For ECOA purposes, an inquiry also becomes an application that requires anadverse action notice if the lender denies the loan, regardless of how much information has been received.
On Form 1003, which of the following is true of Payments for alimony or child support?
A. Must continue beyond 10 months to be included
B. Must continue beyond 12 months to be included
C. Must continue beyond 2 years to be included
D. Must continue beyond 3 years to be included
Answer A
Remember the question ask about payments or debts for alimony not receiving alimony as income.
Payments for alimony or child support must continue for 10 months beyondthe application date in order to be included.
Receipt of alimony or child support payments must continue for how long beyond the application date in order to be included?
A. Must continue beyond 10 months to be included
B. Must continue beyond 12 months to be included
C. Must continue beyond 2 years to be included
D. Must continue beyond 3 years to be included
Answer D
Remember we are talking about income alimony not debt alimony.
Receipt of alimony or child support payments must continue for 3 years beyond the application date in order to be included.
What should the MLO do If the credit report doesn’t show a required minimum payment amount?
A. The lender should clarify with he consumer
B. The lender shouldn’t use it
C. The lender should use an amount equal to ten percent of the outstanding balance.
D. The lender should use an amount equal to five percent of the outstanding balance.
Answer D
If the credit reportdoesn’t show a required minimum payment amount, the lender should use anamount equal to five percent of the outstanding balance.
Which if true of a conventional loan debt calculation
A. PITI is not theborrower’s recurring monthly debt obligations.
B. PITI that is not an investment is considered part of the borrowers recurring monthly debt obligations.
C. PITI is considered part of the borrowers recurring monthly debt obligations if its an investment property.
D. PITI is considered part of the borrowers recurring monthly debt obligations for both residential and investment properties.
Answer B
When the borrower owns mortgaged real estate (other than investment properties), the full mortgage payment (principal, interest, taxes, and insurance) that the borrower is obligated to pay is considered as part of theborrower’s recurring monthly debt obligations.
** On an FMNA form 1003, which of the following is included on the reserve section?
A. Bank/Brokerage Account, name of institution, account number and value of account
B. Name of bank, account number, APR, Interest earned
C. Bank account number, amount and sources of income
D. Accounts, debts, payments and monthly payments
Answer A
On a FNMA 1003 Reserve section includes Any bank or brokerage account that is to be used for qualifying purposes should be entered here with the name of the institution, the account numberand the value of the account.
When the borrower’s credit report includes any revolving charge account
with an outstanding balance that suggests that more than ten payments remain to be paid the lender must
A. lender is not allowed to consider the payment on the account as
part of the borrower’s recurring monthly debt obligations.
B. lender always must consider the payment on the account as part of the borrower’s recurring monthly debt obligations even if it indicates the loan will be paid off before closing.
C. consider the payment on the account as part of the borrower’s recurring monthly debt obligations Only if it indicates the loan will be paid off before closing.
D. Not add it to the loan
Answer C
When the borrower’s credit report includes any revolving charge account
with an outstanding balance that suggests that more than ten payments remainto be paid, the lender always must consider the payment on the account as part of the borrower’s recurring monthly debt obligations.
What should an MLO do if there are Installment debt with ten or fewer monthly payments remaining?
A. Never include it in the loan
B. Always include them in the loan
C. Only considered as a recurring debt obligation if it significantly affects the borrower’s ability to meet his or her credit obligations.
D. Include it as a tax deductible debt
Answer C
Installment debt with ten or fewer monthly payments remaining
also may be considered as a recurring debt obligation if it significantly affects the borrower’s ability to meet his or her credit obligations.
What should the MLO do if Student loans has deferred payments and no monthly payment is stated on the credit report?
A. MLO should obtain a copy of the borrower’s original payment agreement and use that amount to include in the calculation of the total monthly debt obligation.
B. MLO does not need to use it because it is not affecting the borrower immediate ATR
C. MLO can decide if it’s needed to be on the loan
D. MLO can ask lender to not use it
Answer A
Student loans with deferred payments must also be considered as a monthly debt. If no monthly payment is stated on the credit report, the loan originator should obtain a copy of the borrower’s original payment agreement and use that amount to include in the calculation of the total monthly debt obligation.
Which if f the following is true of conventional loan reserve requirements?
A. 2 months of mortgage PITI payments
B. The total of the accounts should equal closing costs and 2 months of mortgage PITI payments
C. The total of the accounts should equal closing costs and 6 months of mortgage PITI payments
D. 2 months income
Answer B
At a minimum, the total of the accounts shouldequal closing costs and 2 months of mortgage PITI payments for
conventional loans.
What is the amount of Reserve required for a conventional investment property? A. 2 months B. 3-4 months C. 2-6 months D. 6 months
Answer D
On a conventional investment property 6 months of Reserve is required
What is the amount of Reserve required for a conventional primary residence property? A. 2 months B. 3-4 months C. 2-6 months D. 6 months
Answer C
On a conventional primary residential property 2-6 months of Reserve is required
What is the amount of Reserve required for a conventional Vacation Home? A. 2 months B. 3-4 months C. 2-6 months D. 6 months
Answer: B
On a conventional vacation property 3-4 months of Reserve is required
Which of the following is true about the reserve on a VA 1-2 unit home loan? A. 2 months reserve B. 2-3 months reserve C. 6 months reserve D. No reserve required
Answer D
Which of the following is true about the reserve on a VA 3-4 unit home loan? A. 2 months reserve B. 4 months reserve C. 6 months reserve D. No reserve required
C
Which of the following is true about the reserve on a FHA 1-2 unit home loan? A. 2 months reserve B. 4 months reserve C. 6 months reserve D. No reserve required
D
Which of the following is true about the reserve on a FHA 3-4 unit home loan? A. 3 months reserve B. 4 months reserve C. 6 months reserve D. No reserve required
Answer A
Which is acceptable form of funds for reserve?
A. Savings/brokerage accounts, vested retirement accounts, vested life insurance, business accounts
B. A. Savings/brokerage accounts, 401K, unvested life insurance, stock accounts
C. Checking and savings
D. Cash, checking, savings account
A
What option should you give a borrower with an FHA loan wanting to refinance but option for owe more on the mortgage than the current value of the home and are unable to obtain a conventional refinance? A. Offer a HECM loan B. Offer FHA streamline refinance C. Offer hybrid finance D. Offer cash out option
Answer B.
If the current mortgage is an FHA loan, and the borrower is current on the
past three months of mortgage payments, an FHA Streamline Refinance is a likely choice. There is no verification of employment, income, debt or credit score with this program. The FHA believes that past payment history is sufficient proof of the borrower’s ability and intent to pay the mortgage on time. In addition, an appraisal is not required, and funding is based on the original purchase price. This is a great option for borrowers who owe more on the mortgage than the current value of the home and are unable to obtain a conventional refinance. Cash-out refinances aren’t allowed in this program.
A borrower wants to finance a equity line of credit or second mortgage, what needs to be done for this to happen?
A. Apply for refinance
B. subordinate the lien
C. Resubordination or if junior lien paid off
D. Change the recorded date of the lie
Answer C
Junior lien holders (equity lines of credit and second mortgages) need to
agree to allow the new mortgage lien to assume the senior position
(resubordination) because the junior lien has the legal right to move into thesenior position.
Credit documents must be no more than how many days old on the date the note assigned? A. 30 B. 60 C. 90 D. 120
Answer D
Credit documents must be no more than 120 days old on the date the note issigned. This includes new construction.
Fannie Mae 1005 is a A. Verification of Deposit B. Verification of employment C. Verification of income D. Verification of address
B verification of employment
Fannie Mae 1006 is a A. Verification of Deposit B. Verification of employment C. Verification of income D. Verification of address
A
According to Sallie Mae, which of the following does not allow the Power of attorney signature? A. Note B. Credit Check C. LE D. Mortgage note
Answer C
A power of attorney authorization can be used to allow an alternate signer onany document except the loan application.
Does Fannie Mae purchase Balloon Mortgages?
A. Only if they’re bridge loan and small QM balloons
B. Only if they’re conventional
C. Only if they’re backed by the government
D. Never
Answer A
Most balloon mortgages are not purchased by Fannie Mae since they aren’tQualified Mortgages. Two exceptions are short-term bridge loans and originations by small lenders (QM).
Fannie Mae 1008 is for A. Verification of income B. Verification of employment C. Verification of deposit D. Transmittal Summary
Answer D
processor preparesthe Fannie Mae 1008 Transmittal Summary, which is a form that summarizes the applicant’s data, and places it as the first sheet of paper in the file. The entire package is then sent to the underwriter.
The Fannie Mae Total Obligations Ratio is: A. 10% B. 26% C. 36% D. 46%
Answer C
Total obligation is back end ratio
Payment for alimony must continue for how long after the applicationdate in order to be included as a debt? A. 1 month B. 10 months C. 2 years D. 3 years
B
How many months must be left on an installment charge in order to beincluded as a debt? A. More than 1 month B. More than 3 months C. More than 5 months D. More than 10 months
D
If there is no minimum monthly credit card payment, what percent of thebalance is used in the calculation of monthly debt? A. 1% B. 3% C. 5% D. 10%
C
In order to be counted as income, retirement income must continue forhow long after the loan application is signed? A. 1 year B. 2 years C. 3 years D. 4 years
C
How many years of home addresses are required on the typical loanapplication? A. 1 year B. 2 years C. 3 years D. 4 years
B
How many years of employment history may be required on the loanapplication? A. 1 year B. 2 years C. 3 years D. 4 years
B
Which of the following is NOT usually required by a loan applicant?
A. Photo ID
B. Personal references
C. 2 months of bank or brokerage statements
D. 30 days previous pay stub
B
A lock-in agreement does NOT include: A. Interest rate B. Expiration date C. Lock-in fee D. APR
D
Which IRS form does a lender use to verify an applicant’s income?A. 2071
B. 321 - ML
C. 911 - R
D. 4506 - T
D
Fannie Mae requires how many years of credit and public recordsreview? A. 1 year B. 3 years C. 5 years D. 7 years
D
