Loan Origination Activities (Part 1)

Question 1

Purpose of a Loan Application

Answer 1

It is designed to detail a borrower’s history, trends, and attitude to predict future loan repayment behavior.

Question 2

What Uniform Loan Application do Fannie Mae and Freddie Mac use?

Answer 2

1. ) Fannie Mae Form 1003

2. ) Freddie Mac Form 65

Question 3

Describe the Uniform Residential Loan Application

Answer 3

1. ) Allows the lender to collect info about the borrower/property.
2. ) May be filled out in writing, by telephone, or electronically submitted.
3. ) If the borrower doesn’t provide all data during initial consultation, missing info must be provided at a later date, which will delay the loan process.

Question 4

Describe the process of the creation of a loan and beyond that

Answer 4

Steps:

1. ) Origination: Done by MLOs, the process of making or initiating a new loan.
2. ) Processing: A Loan Processor verifies data in loan files; coordinating loan process.
3. ) Underwriting: An Underwriter evaluates and decides whether to make a new loan (Give credit to the borrower).
4. ) Servicing: This step is set apart from the first three steps, this step is not required for qualifying a loan; but is the continued maintenance of a loan after close.

Question 5

Pre-Qualification

Answer 5

Pre-determining what a potential borrower may be able to borrow.

• Does not guarantee approval; not binding.
• Done by any MLO.
• Does not require disclosure.

Question 6

Pre-Approval

Answer 6

Determining if the potential borrower can be financed and for what amount.

• Rendering a credit decision; may be binding.
• Only done by a lender.
• Triggers mandated disclosures, unless specific property not identified.

Question 7

What is the role of the Loan Originator?

Answer 7

1. ) Interview the applicant. (Complete the loan application).
2. )”Pull” the credit report.
3. ) Gather all the documentation together (Submit the packaged documentation to the chosen lender’s underwriter).

Question 8

What is the role of the Processor?

Answer 8

1. ) They will verify the info collected by the Loan Originator.
2. ) Send verification forms to the appropriate parties.
3. ) Order the credit report (If not done by the LO).
4. ) Order the Appraisal.

Question 9

What is the role of Underwriting?

Answer 9

The Underwriter evaluates documentation, borrower info, and various risk factors to make a decision:

• Automated: Info fed into automated underwriting system (AUS).
• Manual: Done by an individual who works for a lender.

Question 10

What AUS does Fannie Mae and Freddie Mac use?

Answer 10

1. ) Fannie Mae: Desktop Underwriter

2. ) Loan Prospector

Question 11

(Completing an Application) Self-employed needs personal and corporate tax returns for a minimum of how many years?

Answer 11

2 years.

• 25% of income derived from 1099 income is considered self-employed.
• 25% or more ownership in a business is considered self-employed.

Question 12

(Completing an Application) Wage-Earner (W2 Employee) should have continuous employment for at least how many years in the same field?

Answer 12

2 years.

Question 13

(Employment Doc.) For overtime and bonus pay to be qualified as income, it must be consistently received for how many years?

Answer 13

2 years.

Question 14

(Employment Doc.)What other documentation is required or may need be required?

Answer 14

Appropriate W-2 forms
– Original pay stub for the previous 30-day period
– May require Verification of Employment (VOE) forms
– May require Verification of Deposit (VOD) forms
– May require Verification of Rent (VOR) forms
– May require Verification of Mortgage (VOM) forms

Question 15

What must be considered for Retirement/Pension for as income?

Answer 15

Must continue for 3 years beyond the application date.

Question 16

What must be considered for Alimony, child support for income?

Answer 16

The borrower does not have to list alimony as income—its up to them.

Question 17

Tax free/Public Assistance income may be “grossed up” by how much?

Answer 17

25%

Question 18

Rental income is calculated to what percentage—for what purpose?

Answer 18

75% can be counted as qualified income; to allow for vacancy loss of 25%.

Question 19

What IRS form is required to give lender permission to request copies of federal tax returns?

Answer 19

IRS form 4506-T