☑️ Chapter 2: The Mortgage Lending Process

Question 1

Vocabulary: A professional estimate, or opinion of the value of a piece of property (parcel of land), as of a certain date, supported by objective data.

Answer 1

A. Appraisal

Question 2

Vocabulary: A person who estimates the value of property, especially a licensed expert qualified to do so by education and experience.

Answer 2

A. Appraiser

Question 3

Vocabulary: A business entity, that for a management fee administers a network of certified and licensed appraisers to fulfill real estate appraisal assignments on behalf of mortgage lending institutions.

Answer 3

A. Appraisal Management Company

Question 4

Vocabulary: Items of value.

Answer 4

A. Assets

Question 5

Vocabulary: A court process that canceled debt and provided some relief for creditors.

Answer 5

A. Bankruptcy

Question 6

Vocabulary: This is sometimes also called a liquidation proceeding. Also known as _____.

Answer 6

A. Chapter 7 Bankruptcy
B. Straight Bankruptcy

Question 7

Vocabulary: This is sometimes called a debt repayment proceeding, it is filed by individuals who want to pay off their debts, in a whole, or in part, over a period of 3 to 5 years.

Answer 7

A. Chapter 13 Bankruptcy

Question 8

Vocabulary: A persons record of debt repayment, often used as a guide to whether they are likely to pay accounts on time in the future.

Answer 8

A. Credit History

Question 9

Vocabulary: When a loan is taken on property already owned, and the loan amount is above and beyond the cost of the transaction, the payoff of existing liens, and related expenses.

Answer 9

A. Cash-Out Refinancing

Question 10

Vocabulary: A system created by credit bureaus and used by lenders to make a determination regarding the credit worthiness of a potential borrower. It involves a credit bureau, such as Experian, Equifax, or TransUnion, assigning numerical, values, or scores, to consumers based on factors, including payment history, on prior credit obligations, utilization, available, credit, length of credit, history, and type of credit.

Answer 10

A. Credit Scoring

Question 11

Vocabulary: A recurring monetary obligation that will not be canceled.

Answer 11

A. Debt

Question 12

Vocabulary: The relationship of a borrower’s total monthly debt obligations (including housing and long-term debts with 10 or more payments remaining) to income, expressed as a percentage. Also known as _____?

Answer 12

A. Debt-To-Income Ratio
B. DTI / Total Debt Service Ratio / Back End Ratio

Question 13

Vocabulary:
Debt-To-Income Ratio:
What is the formula for the Debt-to-Income Ratio?

A. What is the Formula?
B. What does total debt include?

Answer 13

A. Total Debt / Income = Ratio %
B. Total monthly payment obligations, housing payments + PITI, and long-term debts with 10 or more payments remaining.

Question 14

Vocabulary: This is a form of pre-paid interest that is charged by a lender to increase the yield on a lower than market interest rate loan, so that a borrower may get the benefit of a lower interest rate.

Answer 14

A. Discount Points

Question 15

Vocabulary: One point equals 1% of the Loan Amount. This
one point of the loan amount can be added or subtracted.

Answer 15

A. Discount Points

Question 16

Vocabulary: An account, the loan servicer controls on behalf of a borrower to pay for taxes, insurance, premiums, or other fees, to be certain that payments for these associated charges to a federally related mortgage loan, are remitted on time.

Answer 16

A. Escrow Account

Question 17

Vocabulary: This is the relationship of a borrower’s total monthly housing expense to income, expressed as a percentage.

Answer 17

A. Housing Expense Ratio

Question 18

Vocabulary:
Housing Expense Ratio:
A.What is the formula for the Housing Expense Ratio?

B. What is this also known as?

Answer 18

A. Total Housing Expense / Income = Ratio %

B. Front End Ratio

Question 19

Vocabulary: Financial obligations owed by a borrower.

Answer 19

A. Liabilities / Unpaid Debts

Question 20

Vocabulary: Consumers oral or written discussion about a mortgage, loans rates, terms, or other characteristics.

Answer 20

A. Loan Inquiry

Question 21

Vocabulary: A written or electronically transmitted agreement between a mortgage, banker, or exempt organization, and an applicant for a mortgage loan, which, subject to the terms, set forth in the agreement, obligate the mortgage banker, or exempt organization, to make a mortgage loan, at a specified rate, and a specified number of points, if any.

Answer 21

A. Lock-In Agreement

Question 22

Vocabulary: This is a typical mortgage payment. That includes the principal, the interest, the taxes and the insurance.

Answer 22

A. PITI

Question 23

Vocabulary:
What is the meaning of the abbreviation PITI?

Answer 23

A standard mortgage payment.
A. Principal (Princesses)
B. Interest (Into)
C. Taxes (Taxis)
D. Insurance (Instead)

Question 24

Vocabulary: 1% of the loan amount. A fee charged by a lender for making a loan, calculated based on the loan amount. Also known as ___?

Answer 24

A. Point
B. Basis Point

Question 25

Vocabulary: The process by which an agent or lender determines that a potential borrower can be financed for a certain amount of money.

Answer 25

A. Pre-Approval

Question 26

Vocabulary: The process by which an agent or lender reviews potential borrowers to determine if they are likely to be approved for a loan and for approximately what amount.

Answer 26

A. Pre-Qualification

Question 27

Vocabulary: The amount of a promissory note, secured by a mortgage in a consumer credit mortgage transaction.

Answer 27

A. Principal Balance

Question 28

Vocabulary: Cash on deposit or other highly liquid assets a borrower must have to cover PITI mortgage payments for a certain period of time after the borrower makes the cash down payment and pays all closing costs.

Answer 28

A. Reserves

Question 29

Vocabulary: Income that can reasonably be expected to continue in the future.

Answer 29

A. Stable Income

Question 30

Vocabulary: An amount paid by the lender to a broker in exchange for originating a loan, with a higher than market interest rate. It may be used to reduce closing costs, or as a source of profit for the broker.

Answer 30

A. Yield Spread Premium (YSP)

Question 31

The Mortgage Lending Process: Role of the Mortgage Professional:
Functions of Mortgage Professionals:
This is the process of making or initiating a new loan. This involves being the initial contact for a consumer, counseling them on the advantages and disadvantages of available loan programs, and then taking a loan application. MLOs are required to order a credit report.

Answer 31

A. Origination

Question 32

The Mortgage Lending Process:
Role of the Mortgage Professional:
Functions of Mortgage Professionals:
This person works on the loan file after it is assembled by the originator. This person is typically responsible for verification of the information contained in the loan FILE. (I.e. sending out employment, verification forms, and coordination of the various aspects of the loan) such as working with the TITLE company.

Answer 32

A. Loan Processing

Question 33

The Mortgage Lending Process:
Role of the Mortgage Professional:
Functions of Mortgage Professionals:
_________ is the process of evaluating RISK, and deciding whether to make a new loan, and, if yes, on WHAT terms. This is performed by the _____ source, usually an investor, depository, or mortgage lender, but NEVER by a mortgage _____, who ONLY originates loans for lenders. This process involves evaluating income, credit doors, credit, history, appraisals, job, history, and other measures of strength or weaknesses in the borrower and in the collateral.

Answer 33

A. Underwriting/Analyzing
B. funding
C. broker

Question 34

The Mortgage Lending Process:
Role of the Mortgage Professional:
Fictions of Mortgage Professionals:
This is the continued maintenance of a loan after the loan transaction has closed. This can be done by a lender, a company set up solely to perform this function, or some other acceptable entity. This involves maintaining DIRECT contact with borrowers, sending mortgage and escrow ANALYSIS, statements, COLLECTING payments, and PURSUING late payments. Often a primary lender will sell your mortgage to another lender or investor on the secondary market who will CONTINUE this process on this loan for a fee.

Answer 34

A. Servicing

Question 35

The Mortgage Lending Process:
The Loan Process:
In the loan process, if the borrower is NOT ready to make an offer on the house, but wants to know how much money he may qualify for the borrower may be ______. This is not the same as _________ borrowers.

Answer 35

A. Pre-Qualified
B. Pre-Approving

Question 36

The Mortgage Lending Process:
The Loan Process:
Before the borrower has made the decision to make a loan application, they must make a request by telephone, Internet, or other means, with a lender to inquire about the types of loans and the corresponding interest rates availables.

Answer 36

A. Step #1 Loan Inquiry

Question 37

The Mortgage Lending Process:
The Loan Process:
When an MLO receives a ______ related to mortgage loan interest rates, a corresponding ANNUAL PERCENTAGE RATE (APR) MUST be provided to the inquiring consumer at the SAME time a RATE QUOTE is delivered. This is required for all loan, inquiries, whether verbal or written.
• Give An Example Of A Rate Quote?

Answer 37

A. Step #1 Loan Inquiry
B. MLO can say “Today’s interest rate on a 30 year fixed rate loan is 4.25% APR of 4.497%”

Question 38

The Mortgage Lending Process:
The Loan Process:
______ is the process of pre-determining how much a potential borrower MIGHT be eligible to borrow. This may be done by any MLO, but it does NOT _____ approval. This is NOT _____ binding on the mortgage, broker, or lender, which is why the distinction is IMPORTANT. It is a free test run of the local application process that usually takes only a few hours.
• What response after this can be given to this borrower in regards the their ability to qualify for a loan?

Answer 38

A. Step #2 Pre-Qualification
B. guarantee
C. legally
D. Favorable Or Unfavorable

Question 39

The Mortgage Lending Process:
The Loan Process:
During ________ a credit report may be ordered by an MLO or the borrower may just be asked questions about her financial situation. The MLOs job maybe as simple as making sure that the borrower has a _____ job and NO glaring credit report problems like ______. Often an MLO will CALCULATE the borrowers TOTAL income and TOTAL debt ratios to get an idea of the MAXIMUM mortgage loan payment the borrower may be able to afford.

Answer 39

A. Step #2 Pre-Qualification
B. steady
C. Bankruptcy

Question 40

The Mortgage Lending Process:
The Loan Process:
Some lenders or mortgage brokers, offer a template for the ________ form, which is often created by the local real estate board, which is NOT LEGALLY binding. Assuming the RENDERING of a ______ is NOT EXPECTED. As a result of this, submitting this document to the borrower DOES NOT trigger required disclosures. MLOs can also provide the ______ worksheet while the loan is still in this state.

Answer 40

A. Step #2 Pre-Qualification
B. credit decision
B. closing cost

Question 41

The Mortgage Lending Process:
The Loan Process:
The real estate mortgage LOAN APPROVAL process traditionally consists of what four steps?

A. _____: with an MLO.
B. _____: a loan application.
C. _____: a loan application.
D. _____: the borrowers financial status and the property.

Answer 41

A. CONSULTING
B. COMPLETING
C. PROCESSING
D. ANALYZING

Question 42

The Mortgage Lending Process:
The Loan Process:
_________ is the process by which a lender determines if a potential borrower can RECEIVE financing through the lender, and for what AMOUNT of money. The lender is thus RENDERING a _______. A mortgage broker CANNOT give a borrower, this document, ONLY the ______ who is going to FUND the mortgage loan can provide this document.

Answer 42

A. Step #3 Pre-Approval
B. credit decision
C. lender

Question 43

The Mortgage Lending Process:
The Loan Process:
A borrowers circumstances can, and do change, that is why there are always CONDITIONS listed in the _______ stage of the loan process. This document is REQUIRED to be completed in ______, and must be ISSUED present to the policies and procedures established by the employer or mortgage lender.

Answer 43

A. Step #3 Pre-Approval
B. writing

Question 44

The Mortgage Lending Process:
The Loan Process:
In order to receive the ______ needed to purchase a home:
1. A borrower goes through most of the same steps, as in the full loan process, such as completing an application and providing documentation of income and assets.
2. A lender is stating that the prospective borrower situation has been investigated, and, provided all circumstances STAY the SAME, the lender is willing to loan you enough money to purchase a house.
3. This is especially helpful when shopping for a home because having this is a powerful ______, too, and getting a purchase offer, accepted by the seller and may be a _______ of contract ACCEPTANCE.

Answer 44

A. Step #3 Pre-Approval
B. negotiation
C. requirement

Question 45

The Mortgage Lending Process:
The Loan Process:
A request for ________ is NOT considered a loan application. This is because the ACTUAL purchase property and loan AMOUNT applied for have NOT yet been ____. Information related to a loan application are REQUIRED to be reported on the ______ website to comply with the ______ Act.

Answer 45

A. Step #3 Pre-Approval
B. identified
B. Loan Application Register (LAR)
C. Home Mortgage Disclosure Act (HMDA)

Question 46

The Mortgage Lending Process:
The Loan Process:
During the _______ process AFTER the loan application is submitted for _____NOT Pre-Approval. The borrower MUST be given a ________, which LEGALLY binds the MLO and borrower to the terms of the agreement.

Answer 46

A. APPROVAL
B. Loan Estimate
B. Step #3 Pre-Approval

Question 47

The Mortgage Lending Process:
Consulting with the MLO:
As a borrower decides how to proceed with applying for their loan, MLOs should remember these best practices:
• Do not interject personal JUDGMENT on the situation.
• Let the applicant’s job history and credit DICTATE the course of any action you suggest. This is especially important it you are an MLO representing many different lenders and loan programs.
• Always let the client or customer have the final SAY
as to HOW they apply for a loan and with WHOM.
• If you work with more than one company program CONSULT with your mortgage company or employer regarding POLICIES you are UNSURE of before giving any type of advice.
• Provide mortgage loan options for the consumer to choose from as is required by the ______ Rule.

Answer 47

A. Mortgage Originator Compensation Rule

Question 48

The Mortgage Lending Process:
Consulting with the MLO:
Initial Discussions:
After the ____ and ____ program is selected, initial discussions usually involve the various types of mortgages the lender offers (e.g., 30-year, 15-year, fixed-rate, ARM) so the borrower can decide which LOAN best suits their NEEDS. A borrower needs to give the lender a good deal of personal and financial data on which the lender will BASE the lending decision. Providing the borrower with a COMPLETE list of REQUIRED documents and reviewing these documents early in the application helps to SPEED up the _____ process.

Answer 48

A. lender
B. loan
C. Approval

Question 49

The Mortgage Lending Process:
Consulting with the MLO:
Initial Discussions:
When the goal is an actual loan approval (not pre-approval) for a purchase, the ______ NEEDS to be examined as well. The MLO wants to ensure that it’s possible to comply with the TERMS of the sales contract.
Of particular concern are the ______ date and the ______ date. A contract may call for a closing date that is too early to be realistic. If the lender can’t meet the closing date, a more FEASIBLE date can be agreed upon by all parties to the contract in order to avoid frustration. Loan fees and pricing _______ may also be listed in the sales agreement and should be reviewed.

Answer 49

A. sales contract
B. financing commitment
C. closing
D. adjustments

Question 50

The Mortgage Lending Process:
Consulting with the MLO:
Interest Rates:
One topic that inevitably arises very early in a borrower’s conversations with an MLO is the _______, which is the AMOUNT charged by a lender to a borrower for the USE of the lender’s ASSETS, expressed as a PERCENTAGE of the loan amount or the principal. When considering interest rates, you may hear the term _____, which is 1/100th of a percentage point. For example, 325 basis points equal _____% (decimal) or _____%(fractional).

Answer 50

A. interest rate
B. basis point
C. 3.25%
D. 3 1/4%

Question 51

The Mortgage Lending Process:
Consulting with the MLO:
Interest Rates:
A couple of other terms an MLO should keep in mind when discussing INTEREST RATES with a borrower are:
• _______: A term that describes the rate WITHOUT discounts or points that lenders offer ONLY to mortgage BROKERS, also known as the “______” rate, that does NOT create an additional ______ or provide for ______ on the Loan Estimate for the borrower.

Answer 51

A. Par Rate
B. wholesale
C. charge
D. credit

Question 52

The Mortgage Lending Process:
Consulting with the MLO:
Interest Rates:
A couple of other terms an MLO should keep in mind when discussing INTEREST RATES with a borrower are:
• _______: This is a COMMITMENT guaranteed by a lender that an INTEREST RATE will NOT change on a SPECIFIC loan for a SPECIFIC period of TIME. Since this type of agreement generally requires that the loan close by a SPECIFIC date, the ANTICIPATED closing date should be CAREFULLY considered. If a loan does NOT close before the ______ of this type of interest, a borrower may be required to pay a_____ fee to EXTEND the locked interest rate for a NEW period of time. If current interest rates are LOWER, a borrower may be required to close at the previously ______, HIGHER interest rate.
In either situation, a borrower most often will receive the “WORST” of the market; that is, the advantage will be to the lender.
Remember that when a borrower enters into this type of agreement, they agree to _____ the locked interest rate, even if interest rates Decline after locking, in most instances.

Answer 52

A. Rate Lock (Lock-In Agreement)
B. Expiration
C. Rate Lock Extension
D. Locked
E. ACCEPT

Question 53

The Mortgage Lending Process:
Consulting with the MLO:
Interest Rates:
A couple of other terms an MLO should keep in mind when discussing INTEREST RATES with a borrower are:
• _______: Between the time of application and closing, a borrower may choose to BET on interest rates decreasing by electing this option. This is essentially choosing NOT to LOCK the interest rate. Since it is the borrower’s RESPONSIBILITY to lock their rate before closing, choosing this option is considered RISKY and may result in a HIGHER interest rate.

Answer 53

A. Float

Question 54

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
In addition to interest, there are OTHER loan fees associated with processing a real estate mortgage loan, including fees for obtaining a borrower’s _____ bureau report, securing a property _____ report, and completing necessary property inspections. Other items like _____ insurance and _____ fees are paid IF and WHEN a loan closes. Fees that occur ONLY when a loan CLOSES are likely to be paid out of ______ funds, but other EARLY expenses incurred must be paid even if the loan DOES NOT close and are referred to as “_____” costs.

Answer 54

A. credit
B. appraisal
C. title
D. recording
E. closing
F. POC / Paid Outside of Closing

Question 55

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
• _______: is the total AMOUNT of money the lender can make from a loan in RELATION to the amount INVESTED. There are several methods for lenders to realize a ______.
• Most of this return is accounted for as a result of payments to the lender of the ______ paid by the borrower over the term of the loan.
• Another opportunity for a lender to recognize return is at _______ when the fees are collected from the borrower.
• A lender could also recognize a return during the loan term through ______ fees or by collecting a fee for those loans that allow the lender the be paid the ______ penalty if;
For Example: the borrower pays OFF the loan TWO years after the loan is CLOSED.

Answer 55

A. Lender’s return (lender’s yield)
B. return on their investment (ROI)
C. interest
D. closing
E. servicing
F. prepayment

Question 56

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Lender’s Yield:
The lender is generally ONLY interested in the TOTAL amount of MONEY it will make from the loan, not necessarily its _____. Unlike MLOs, LENDERS may earn profit both from _____ fees as well as the level of ______ being charged to the borrower.
Title XIV of the Dodd-Frank Act, which is designated as the ______ Act, PROHIBITS any direct or indirect compensation to an MLO that varies based on the terms of the loan, other than the AMOUNT of the ______ loan amount which was enacted by the _____ Rule of the _____ Act.

Answer 56

A. source
B. upfront
C. interest
D. Mortgage Reform and Anti-Predatory Lending Act
E. principal
F. Mortgage Loan Originator Compensation Rule
F. Dodd-Frank Act

Question 57

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Loan Origination Fees:
For loans that actually CLOSE, lenders CAN charge a _______ fee to cover the administrative costs of making and processing the loan, including setting up the loan on the lender’s books. Such fee may be expressed as a fraction, whole, or multiple points. A ______ is simply ONE percent of the LOAN amount.
So, for example, on a $120,000 loan, the borrower would have to pay an additional $1,200 for every point the lender charged as an origination fee.
Origination fees are charged for lender services, such as closing fees, underwriting fees, documentation fees, etc. They serve to OFFSET the lender’s OVERHEAD and to INCREASE the lender’s ______. These fees are based on what the current market will bear.
NOTE: _____ loan processing fees may NOT always be included in the origination fee. Some brokers and lenders may charge a ______ loan processing fee.

Answer 57

A. Loan Origination
B. Origination Point
C. Return on Investment
D. State
E. Separate

Question 58

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Real Success: Credit Report:
MLOs can collect a ______ fee at the INITIAL application, but NO other fees may be collected until the ______ disclosure is delivered to the borrower within three business days of the MLO’s receipt of a _____ loan application AND the borrower indicates their intention to _____ with the transaction. At that point, other transaction fees-such as for an ______ of the property may be charged.

Answer 58

A. credit report
B. Loan Estimate
C. completed
D. proceed
E. appraisal

Question 59

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Discount Points:
Discount points represent a PRE-PAYMENT of _______ at the BEGINNING of a loan thus reducing the _____ interest rate charged for some defined PERIOD of the life of the loan. ONE point equals 1% of the loan amount. This essentially SHIFTS the ____ of when the lender collects its fees for making the loan. Discount points are the OPPOSITE of the YSP because the borrower pays _____ out-of-pocket UPFRONT in order to pay ____ out-of-pocket LATER. Discount points, especially if paid by the _____, could allow the borrower to qualify for a loan that would otherwise be impossible to get.

Answer 59

A. interest
B. note
C. timing
D. MORE
E. LESS
F. Seller

Question 60

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Discount Points:
By charging the borrowers the discount points _____, the lender is able to make up the REQUIRED ______ that is lost by making the loan BELOW ______. However, it’s important to know that to be legitimate, the discount points must reflect a ______ to the market or par rate that is reasonably CONSISTENT with established industry NORMS and practices for secondary market transactions.
In other words, a lender could NOT quote a HIGHER interest rate than the borrower would QUALIFY for, and then offer ____ to LOWER it as a means of INCREASING _____.

Answer 60

A. upfront
B. return on investment
C. par rate
D. bona fide reduction
E. profit

Question 61

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Discount Points:
Although PAYING discount points to get a LOWER interest rate would seem to be of BENEFIT primarily to the _____, BUT discount points can also BENEFIT the _____. Who pays the points is open to negotiation. A ____ or _____ may be willing to pay discount points to make the property more marketable.

Answer 61

A. buyer
B. seller
C. seller
D. builder

Question 62

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Discount Points:
How the discount is PRICED depends on how many points it takes to BUY the ____ down is based on many assumptions and calculations by the lender, primary of which is an assumption as to how long the loan might ____ and where _____ interest rate percentages are headed. Generally, lenders assume that the typical 30-year loan is paid off when a property is SOLD or REFINANCED within ____ to ____ years and they will determine discount points with that in mind.

Answer 62

A. rate
B. last
C. interest rates
D. 8 to 12

Question 63

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Discount Points:
The difference between “_____” points and “_____” points is apparent on the _____. ALL _____ POINTS must be lumped together as the TOTAL _____ FEE on the LOAN ESTIMATE while ______ points used to BUY DOWN the rate must be indicated as a ___ the borrower incurs for the SELECTED interest rate. This allows the borrower to make an informed decision about the rate options available and the IMPACT on the loan.

Answer 63

A. Origination
B. Discount
C. Loan Estimate
D. origination
E. origination
F. discount
G. Charge

Question 64

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Yield Spread Premium:
Yield spread premium (YSP) is also called _____ this is a tool that an MLO may use to LOWER the ______ cash out-of-pocket expenses at CLOSING for a borrower in exchange for HIGHER monthly out-of-pocket ______ that are required because they then receive a HIGHER ______ rate LATER due to the benefit of the initial lower closing costs.

Answer 64

A. Lender Credits
B. upfront
C. payments
D. interest

Question 65

The Mortgage Lending Process:
Consulting with the MLO: Common Fees Associated with Real Estate Loans:
Yield Spread Premium:
Like _____ points, YSP also SHIFTS the TIMING of the ____ fees that a borrower pays to a lender for the privilege of getting a loan. YSP is the opposite of a discount point. With the YSP the borrower pays ______ out-of-pocket UPFRONT and ____ out-of-pocket later in the form of a HIGHER rate of _____.

Answer 65

A. discount
B. out-of-pocket
C. LESS
D. MORE
E. interest

Question 66

The Mortgage Lending Process:
Qualifying Standards:
When an MLO first meets with a potential borrower (for pre-qualification or pre-approval), they will likely perform an ANALYSIS of the current or allowable monthly ______ based on the borrower’s gross ____ and ____. This provides the MLO and the borrower with a realistic understanding of what mortgage payment the borrower may be able to AFFORD.

Answer 66

A. housing expense
B. income
C. debt

Question 67

The Mortgage Lending Process:
Qualifying Standards:
There are two qualifying standards that the MLO must follow to qualify the borrower:
• _______
• _______
Both ratios may be considered in the underwriting analysis, although some automated underwriting systems (AUS) rely ONLY on the ______ ratio.

Answer 67

A. Housing Expense Ratio
B. Total Debt-To-Income Ratio
ALSO CALLED
• Total Expense Debt Ratio
• Total Debt Service Ratio
C. debt-to-income

Question 68

The Mortgage Lending Process:
Qualifying Standards:
Aside from gross ______, the other key element needed to determine the Housing Expense Ratio and the Total Debt-To-Income Ratio to be eligible to apply by the minimum QUALIFYING STANDARDS is ____, which is an acronym for a mortgage payment that is the SUM of the monthly ____, ____, _____ (property taxes and perhaps mandatory special assessments, if applicable), and _____ (HOMEOWNERS hazard /FLOOD insurance and MORTGAGE insurance, if applicable).
NOTE: When the COLLATERAL property requires _________ fees as a condition of ownership this NEEDS to be included in the PITI as well; for example, as with a condominium; the association fees must be taken into consideration and PITI adjusted to get the COMPLETE housing expense.

Answer 68

A. gross income
B. P.I.T.I.
C. principal
D. interest
E. taxes
F. insurance
G. homeowners association fees

Question 69

The Mortgage Lending Process:
Qualifying Standards:
Qualifying standards may vary from lender to lender.
However, with increased lender dependence on the national ______ market, the majority of lenders throughout the country have incorporated into their CONVENTIONAL loan underwriting procedures the _______ set by the major secondary market investors, specifically Fannie Mae and Freddie Mac. Of course, if the loan being contemplated is to be made in CONJUNCTION with _____ insurance or _____ guarantees, THOSE underwriting standards MUST ALSO be applied (underwriting standards for conventional loans).

Answer 69

A. secondary
B. Qualifying standards
C. FHA insurance
D. VA guarantees

Question 70

The Mortgage Lending Process:
Qualifying Standards:
Housing Expense Ratio:
A borrower’s housing expense ratio, is also called the _____. This is the RELATIONSHIP of the borrower’s total monthly HOUSING EXPENSE to gross INCOME expressed as a percentage.
Q: What is the Formula to Calculate the Housing Expense Ratio %?

Answer 70

A. front-end ratio
B. Formula: Total Housing Expense ÷ GROSS Monthly Income = Housing Expense Ratio %

Question 71

The Mortgage Lending Process:
Qualifying Standards:
Housing Expense Ratio: Conventional lenders consider a borrower’s income adequate for a loan if the proposed total mortgage payment of PITI does not exceed ___% of stable monthly gross income. _____ income, is a borrower’s monthly income that can REASONABLY be expected to CONTINUE in the future.
This is usually a borrower’s gross monthly income from primary ______ and any other acceptable income.

Answer 71

A. 28%
B. Stable monthly income
C. employment

Question 72

The Mortgage Lending Process:
Qualifying Standards:
Total Debt-to-Income Ratio:
A borrower’s total debt-to-income ratio (DTI), also known as the ______, is the RELATIONSHIP of the borrower’s total monthly _____ obligations (including ____ housing and long-term DEBTS) TO gross _____ expressed as a percentage.
Q: What is the Formula to Calculate the Total Debt-to-Income Ratio %?

Answer 72

A. back-end ratio
B. debt
C. income
D. PITI
E. Total Debt
÷ Gross Monthly Income
= Total Debt-to-Income Ratio %

Question 73

The Mortgage Lending Process:
Qualifying Standards:
Total Debt-to-Income Ratio: There are DIFFERENT methods of calculating a borrower’s ____ loan repayment for use in the total debt-to-income ratio, according to the type of loan a borrower will use (VA, FHA, conventional). But regardless of the loan type, _________ MUST ALWAYS be considered in the _____ ratio calculation.

Answer 73

A. student
B. student loan repayment
C. back-end ratio

Question 74

The Mortgage Lending Process:
Qualifying Standards:
Total Debt-to-Income Ratio: Conventional lenders want to be sure that the borrower’s HOUSING EXPENSES, plus any installment DEBT obligations with _____ or more payments left or other debt that will not be canceled, do not exceed ____% of STABLE monthly gross income. Here, _____, _____, or any other COURT-ordered obligations the borrower is OBLIGATED to pay MUST count as debt against the ________ ratio.
NOTE: Debts with FEWER than TEN payments remaining may still be counted AGAINST the borrower ONLY if the monthly payment EXCEEDS _____% of the borrower’s gross monthly income.

Answer 74

A. 10
B. 36%
C. alimony
D. Child support
E. Total Debt-to-Income Ratio
F. 5%

Question 75

The Mortgage Lending Process:
Qualifying Standards:
Using Ratio Standards to Determine Maximum Mortgage Payment:
Using the ______ ratio and _____ ratio, it’s easy to determine the ______ mortgage payment for which a borrower should QUALIFY.
To determine the MAXIMUM mortgage payment ALLOWABLE under the ______ ratio, take the borrower’s stable monthly _____ and ______ it by the MAXIMUM housing expense ratio guidelines of 28% or ____ for conventional loans.

Answer 75

A. housing expense
B. Total debt-to-income
C. maximum
D. housing expense
E. multiply
F. income
G. 0.28

Question 76

The Mortgage Lending Process:
Qualifying Standards:
Using Ratio Standards to Determine Maximum Mortgage Payment:
To determine the figure that represents the largest mortgage payment allowed under the _____ ratio, take the borrower’s stable monthly _____ and _____ it by the MAXIMUM total debt-to-income ratio 36% or ____ for conventional loans. This provides the amount of total long-term debts the borrower is PERMITTED to have. Use the dollar amount you get after the initial calculation and _______ the monthly long-term ________ obligations of the borrower NOT INCLUDING mortgage ____ payments.

Answer 76

A. Total Debt-To-Income Ratio
B. income
C. multiply
D. 0.36
E. subtract
F. debt
G. PITI

Question 77

The Mortgage Lending Process:
Qualifying Standards:
Using Ratio Standards to Determine Maximum Mortgage Payment:
The _____ is the MOST realistic measure of the borrower’s ability to support the loan payments because it considers ALL the borrower’s recurring financial DEBT obligations, which means that the MAXIMUM mortgage payment ALLOWED is likely to be _____ than if only the housing ratio were considered. When the underwriter considers both ratios, the _______ of the two amounts is the MAXIMUM mortgage payment ALLOWABLE.

Answer 77

A. total debt-to-income ratio
B. smaller
C. smaller of the two

Question 78

The Mortgage Lending Process:
Qualifying Standards:
Compensating Factors:
Compensating Factor guidelines are NOT written in stone and may be EXCEEDED under certain circumstances. When they are exceeded, there has been an “______”. These generally occur when “ _______” are present. Compensating factors are ASPECTS of a borrower’s loan application that are STRONG enough to offset WEAKER aspects that do NOT meet general ______.
Example: a borrower applying for a conventional loan who has a back-end debt-to-income ratio of 40% in EXCESS of 36% limitation) BUT who has significant ______ and/ or is borrowing at a ____ LTV may still qualify for the mortgage loan. Most underwriters are HESITANT to exceed guidelines for MANUALLY underwritten loans.
They prefer to submit the loan through an _____, which can determine whether SUFFICIENT compensating factors exist, thereby relieving them of potential LIABILITY and CRITICISM. This is true for BOTH conventional and government loans.
NOTE: What the _____ considers a compensating factor may NOT be acceptable for a ____ program.

Answer 78

A. underwriting exception
B. compensating factors
C. underwriting guidelines
D. cash reserves
E. Low LTV
F. automated underwriting system
G. FHA
H. Fannie Mae

Question 79

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Lenders expect the loans they make to be repaid in a TIMELY manner without the necessity of COLLECTIONS or FORECLOSURE proceedings; thus, employment _____, _____ income, history of debt ____, and current total ____ are important considerations. A loan application is designed to elicit responses that detail the borrower’s history, trends, and attitude as a means of trying to predict future loan REPAYMENT behavior in the future.

Answer 79

A. stability
B. potential
C. Management
D. assets

Question 80

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
The Uniform Residential Loan Application (URLA) is also known as the Fannie Mae Form _____ or Freddie Mac Form ____ is a form that a lender requires a potential borrower to complete, allowing the lender to collect PERTINENT information about the BORROWER and the subject _____.

Answer 80

A. Form 1003
B. Form 65
C. property

Question 81

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
An application may be in writing or electronically _____, including a WRITTEN record of an ORAL application. The borrower typically completes a loan application during the initial consultation with the MLO.
There is a great deal of information asked; therefore, attention to DETAIL when completing the application is advised. If the borrower doesn’t provide ALL necessary data during the initial consultation, the missing information must be provided at a _____ date or the loan process may be delayed.

Answer 81

A. submitted
B. Later

Question 82

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
One Borrower: The URLA Borrower Information is completed. For one borrower, there is NO need to complete the Additional Borrower form. The Unmarried Addendum is ______ if the borrower selected
“Unmarried” for marital status.

Answer 82

A. optional

Question 83

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Two Borrowers. If the borrower and the additional borrower have JOINT financial information (e.g., married couples, civil unions) or SEPARATE financial information, the following options are available:
1. Complete the URLA Borrower Information and Additional Borrower forms and report assets, liabilities, and real estate ______ on the URLA Borrower Information form; or
2. Complete a separate URLA Borrower Information form for EACH borrower and report joint assets, liabilities, and real estate on ONLY _____ of the applications since there is NO need to duplicate this information and _______ financial information on the ______ borrowers URLA form.

Answer 83

A. ONLY
B. one
C. separate
D. corresponding

Question 84

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Three or More Borrowers. Use any ______ of the URLA Borrower and Additional Borrower forms in accordance with the guidelines.
Where borrowers are NOT ______ when completing the loan application, they may duplicate the assets, liabilities, and real estate on each form. The MLO should verify all URLA forms for accuracy.

Answer 84

A. combination
B. collaborating

Question 85

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
The term co-borrower is the same as the term _______ borrower. A co-borrower is simply a person who SIGNS the promissory note along with the primary borrower and ACCEPTS a joint obligation to REPAY the loan. Co-borrowers have ________ in the security property as indicated on the title.

Answer 85

A. additional
B. joint ownership interest

Question 86

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
The most common co-borrower is a _______. Non-occupant _____ may also be co-borrowers or co-signors as they lend an established earnings pattern and financial status to their children who otherwise may be unable to purchase a home.

Answer 86

A. spouse
B. parents

Question 87

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
Co-borrowers must have credit history and assets acceptable to the _______. Furthermore, if the co-borrower does NOT plan to _____ on the collateral property, he must be able to support BOTH his own housing expense plus a proportionate share, if not ALL, of the proposed housing expense for the applicant. Therefore these so called ______ co-borrowers, should NOT be relied on heavily and may do more harm than good.

Answer 87

A. underwriter
B. reside
C. Marginal

Question 88

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
If there is a co-borrower, the applicant must indicate whether the co-borrower’s INCOME or ASSETS will be used for ______, in which case the co-borrower’s information must be included on the application.
Generally, spouses have MERGED assets and credit and therefore are able to use the _____ application.

Answer 88

A. qualifying
B. same

Question 89

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
When there are two unmarried adults on a mortgage application:
• You must determine whether their assets and liabilities are sufficiently JOINED so the information can be meaningfully and fairly presented on a ______ basis. If the answer is YES, they can complete a ____ application.
• If the co-borrowers do NOT have JOINT assets and liabilities, _____ applications should be used. For PRIVACY purposes, CREDIT reports and information disclosed on the mortgage application should be handled ______.

Answer 89

A. combined
B. single
C. separate
D. separately

Question 90

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Co-Borrowers Defined:
A _______ is a credit applicant who does NOT have an ______ in the security property as indicated on the title but signs the promissory note.

Answer 90

A. co-signor
B. ownership interest

Question 91

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 1: Borrower Information:
Section _____ is where the borrower’s personal information is recorded, such as the borrower’s name including _____ names, current address, former address if at current one for less than ____ years, mailing address, phone number, Social Security number, date of birth, marital status, and number of dependents.

Answer 91

A. 1a
B. alternate
C. 2

Question 92

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 1: Borrower Information:
Section 1a:
Borrower Information:
• _____: If applying for joint credit, Desktop Underwriter allows for up to _____ borrowers per loan file submission.
• _____: If the borrower pays monthly rent, the monthly rental amount paid at this location is to be provided.

Answer 92

A. Type of Credit
B. four
C. Current Address

Question 93

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 1: Borrower Information: Section _____ and _____ are where EMPLOYMENT information is recorded, including self-employment information.
• These spaces are asking for the SAME information. The second section is used to record OTHER current employment that is in ADDITION to the employment recorded in the first section.
Q: If the borrower is employed by a family member, property seller, real estate agent, or any other party involved in the transaction.
Do You Select this Checkbox
• Yes Or No?
Q: If the borrower is a business owner or self-employed.
Do You Select the Checkbox
• Yes Or No?
If YES: EARNED income is reflected as a _____ number and LOSSES of income is reflected as a ____ number.

Answer 93

A. Section 1B
B. Section 1C
C. Yes
D. Yes
E. positive
F. negative

Question 94

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 1: Borrower Information:
Section ___ is where PREVIOUS EMPLOYMENT HISTORY is recorded. however it collects information about the position title, start and end dates, and income from PREVIOUS employment.
• This information ONLY needs to be obtained if the borrower’s current employment is less than ____ years and completes the first 3 sections.
• If current employment spans LONGER than two years, select the “______” checkbox.

Answer 94

A. Section 1d
(It is similar to section 1b)
B. Two
C. Does Not Apply

Question 95

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 1: Borrower Information:
Section ____ is where income from OTHER SOUCES is recorded. This would be any income that is not derived from employment sources, such as child support, disability, and unemployment.
• Notice the “NOTE” that identifies that the income from ____, _____support, _____ maintenance, or other income is to ONLY be identified in this section when the borrower ______ the income considered in qualifying for the loan.

Answer 95

A. Section 1e
B. WANTS
C. alimony, child support, separate maintenance

Question 96

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 2: Financial Information: Assets and Liabilities:

A. Section ____ is where LIABILITIES and EXPENSES NOT CONNECTED with a FINANCIAL institution or company, such as child support and alimony, are recorded.

B. Section _____ is used to record other ASSETS or CREDIT the BORROWER has that are NOT ACCOUNT related. The types of assets and credits to be included are listed.

C. Section _____ is where BANK account, RETIREMENT account and other account ASSETS are recorded. The types of accounts to be included are listed.

D. Section ____ is used to record borrower LIABILITIES CONNECTED to a FINANCIAL institution or company, including REVOLVING, INSTALLMENT , OPEN 30-day, LEASE, and other debts. This section is NOT used for real estate LIABILITIES. The types of accounts to be included are listed.

Answer 96

A. Section 2d
• Borrower Liabilities NOT Connected to a Financial Institution
B. Section 2b
• Borrower Assets Not In A Bank Account
C. Section 2a
• Borrower Assets in a Bank Account
D. Section 2c
• Borrower Liabilities Connected to a Financial Institution

Question 97

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 3: Financial Information:
Real Estate:
Section ____ is ONLY completed when the loan’s PURPOSE is to _______ the property.
In this section, INFORMATION about the property being FUNDED is recorded, such as the property’s VALUE and intended OCCUPANCY after closing.

1. Monthly Insurance, Taxes, Association Dues, etc.:
   An amount should ONLY be listed HERE if it is NOT included in the _______ field (for example, if a borrower’s taxes are _____.)
2. For 2-4 Unit Primary or Investment Property:
   These TWO fields are for _____ properties ONLY. The LENDER calculates the _____ monthly rental income.

Answer 97

A. Section 3a
B. REFINANCE
C. Monthly Mortgage Payment
D. Non-Escrowed
E. investment
F. NET

Question 98

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 3: Financial Information:
Real Estate:
Section ____ and ____ are for recording any ADDITIONAL information regarding other PROPERTY the borrower may OWN.

Answer 98

A. Section 3b
B. Section 3c
(These fields are the SAME as in Section 3a)

Question 99

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 4: Loan and Property Information:
Section ____ is where loan information, such as the loan AMOUNT, loan PURPOSE, and PROPERTY address, are recorded.
• ________: Although there is an “______” OPTION to checkbox; “Purchase” and “Refinance” are the ONLY acceptable values for ACCEPTANCE via the ______.
• ______ : Input a value of 1 to 4 based on the number of units ON the property.
• ______ : Provides an OPTION for an FHA SECONDARY residence.

Answer 99

A. Section 4a
B. Loan Purpose
C. Other
D. automated underwriting system
E. Number of Units
F. Occupancy

Question 100

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 4: Loan and Property Information:
Section ____ is ONLY used for any _______ financing a borrower may receive for the SAME subject PROPERTY whether the home is being PURCHASED or REFINANCED.

Answer 100

A. Section 4b
B. Concurrent / Secondary

Question 101

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 4: Loan and Property Information:
Section ___ is where information on any POTENTIAL rental INCOME to be earned from the property being purchased is recorded.
Example: If this is a purchase of a 2-4 unit PRIMARY residence or an INVESTMENT property. purchase?
• The ______ RECORDS/DOCUMENTS the Expected ______ Monthly Rental
Income.
• The ______ CALCULATES the Expected _____ Monthly
Rental Income.

Answer 101

A. Section 4c
B. Borrower
C. Gross
D. Lender
E. Net

Question 102

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 4: Loan and Property Information:
Section ____ is where information regarding any gifts or grants received for this loan is recorded.

Answer 102

Section 4d

Question 103

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 5: Declarations:
Section ____ is where the borrower answers QUESTIONS about the subject PROPERTY and FINANCES for the loan.
A. The borrower marks whether the property will be ______.
If the answer is YES, two follow-up questions will NEED to be answered.
B. If this is a PURCHASE transaction, the borrower NEEDS to identify if there is a _____ or _____ with the SELLER.
C. The borrower records if any MONEY is being ______ from another PARTY that has NOT been DISCLOSED on this loan application.
If the answer is “YES”, then the AMOUNT of money needs to be RECORDED.
D. The borrower identifies if they will be applying for a mortgage loan on ______ property before closing THIS transaction. This question is NOT about the SUBJECT property SECURING the loan.
E. The borrower identifies that the property securing the loan is NOT subject to a ______ that could take PRIORITY over the FIRST mortgage lien.

Answer 103

A. Section 5a
B. occupied as the primary residence
C. family relationship or business affiliation
D. borrowed or obtained
E. another
E. lien

Question 104

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section 5: Declarations:
Section _____ is where the borrower answers questions about financial history such as IF the borrower is subject to outstanding ______ or has been involved in a ________ within the past _____ years.

Answer 104

A. Section 5b
B. JUDGEMENTS
C. FORECLOSURE
D. seven

Question 105

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section _____ : Acknowledgements and Agreements:
This section provides detailed insight to the borrower regarding their obligation once the loan application is signed.
NOTE: A date on the application is OPTIONAL for Fannie Mae _______ underwriting guidelines but is REQUIRED for FHA ______ underwriting guidelines, per the REQUIRED specifications.

Answer 105

A. Section 6
B. Desktop Underwriter
C. TOTAL (Technology Open To Approved Lenders) Mortgage Scorecard

Question 106

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section ____ : Military Service of Borrower:
In this section, the borrower records MILITARY service, including current or past SERVICE, PERIOD of service with the Reserve or National Guard, or STATUS as a surviving SPOUSE.

Answer 106

A. Section 7

Question 107

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section _____ : Demographic
Information of Borrower:
This section provides the ECOA _______ disclosure. If the borrower chooses NOT to provide the information, the bottom TWO sections are to be completed by the _______ to fulfill the requirements of ______ Act reporting.

Answer 107

A. Section 8
B. anti-discrimination
C. lender
D. Home Mortgage Disclosure Act (HMDA)

Question 108

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Borrower Information Form:
Section _____ : Loan Originator Information
This section is where the loan originator records information, such as the loan originator organization NAME and ADDRESS, the NMLSR identification number, and general CONTACT information.

Answer 108

A. Section 9

Question 109

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Lender Loan Information Form:
Section _____ : Property and Loan Information:
In this section, the LENDER enters the following property and loan information:
• ______ If the property is in a COMMUNITY PROPERTY STATE or any borrower LIVES in a community property state, the lender must so indicate.
• _______: This area is used when the loan is for the CONVERSION of a contract for DEED or LAND contract, a RENOVATION loan or a CONSTRUCTION loan.
• ______: If the loan is a REFINANCE, the LENDER must identify whether it is a NO cash-out, LIMITED cash-out, or FULL cash-out transaction. The lender must also indicate if the refinance program is FULL documentation, STREAMLINE refinance, interest rate REDUCTION by the current lender, or some other PROGRAM.
• ______: The lender MUST indicate if the loan will finance ENERGY-related improvements or that the property is currently subject to an ENERGY-related LIEN.
• ______: If the property is a condominium, cooperative, or PUD, the appropriate box must be CHECKED to indicate the dwelling type. If NOT one of these types, the lender must INDICATE as well.

Answer 109

A. Section L1
B. Community Property State
C. Transaction Detail
D. Refinance Type/Refinance Program
E. Energy Improvement
F. Project Type

Question 110

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Lender Loan Information Form:
Section ____ : Title Information:
TITLE information captured by the LENDER in this section includes:
• The ______ that the title to the property will be held in or is currently held in.
• Whether the title will be held in Fee Simple or _____.
• Whether title will be held in:
1. ______ which involves one individual or entity
2. ______ which involves two or more individuals WITH right of survivorship
3. ______ which involves two or more individuals WITHOUT rights of survivorship
4. _______ which involves spouses
5. _______ which involves right of occupancy for life
6. Other
• Whether title will be held by an ______ or ______.
• Whether the property is held in any form of ______.

Answer 110

A. Section L2
B. name(s)
C. Leasehold (including expiration date) In leasehold they must pay rent to the original owner until the INTEREST ends.
D. Sole ownership
E. Joint tenancy
F. Tenancy in common
G. Tenancy by the entirety
H. Life estate
I. Inter Vivos Trust or a Land Trust
J. Indian County Land Tenure

Question 111

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Lender Loan Information Form:
Section ____: Mortgage Loan Information:
In this section, the lender enters the following mortgage loan information:
• ______: If the borrower is applying for Conventional, FHA, VA, USDA, or another TYPE of mortgage.
• ______: Note RATE, Loan TERM, and whether the loan will be a FIRST or SUBORDINATE lien.
• ______: If the loan is FIXED rate, ADJUSTABLE rate, or OTHER. If adjustable rate, the FIRST adjustment and SUBSEQUENT adjustment periods MUST be DISCLOSED as well as the date of the Retirement of the Loan.
• ______: If the loan is INTEREST-only, NEGATIVE amortization, BALLOON payment, PREPAYMENT penalty, or a TEMPORARY interest rate buydown.
• _______: The TOTAL of all housing EXPENSES for the property, including payment for any SUBORDINATE liens.

Answer 111

A. Section L3
B. Mortgage Type
C. Terms of Loan
D. Amortization Type
E. Loan Features
F. Proposed Monthly Payment

Question 112

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Lender Loan Information Form:
Section ____ : Qualifying the Borrower
In this section, the LENDER enters:
• _______: The sales PRICE stated in the sales CONTRACT .
• _______: The cost of these items when included as part of the loan transaction per Investor requirements to BUILD future EQUITY .
• _______ The COST or VALUE of land depending on investor requirements that is NOT part of the sales contract PRICE or INCLUDED in the current INDEBTEDNESS against the property;
NOTE: This is applicable ONLY to certain construction CONVERSION, construction-to-PERMANENT financing,
Or MANUFACTURED housing transactions.
• _______ The BALANCE of the TOTAL mortgage loans on the subject property that will be paid OFF as part of the REFINANCE transaction.
• _______: The TOTAL debt OTHER THAN the mortgage debt secured by the property that is to be paid off AT or BEFORE closing of the mortgage loan.

Answer 112

A. Section L4
B. Sales Contract Price
C. Improvements, Renovations and Repairs
D. Land (if acquired separately)
E. For Refinance: Balance of Mortgage Loans on the Property to be paid OFF in the Loan Transaction as part of the Principal.
F. Credit Cards and Other Debts to be Paid Off BEFORE the Transaction

Question 113

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
URLA Lender Loan Information Form:
Section ____ : Qualifying the Borrower
In this section, the LENDER enters:
• _____ The amount of closing COSTS that are used in qualifying the borrowers for both the SUBJECT loan AND any CONCURRENT subordinate financing.
• _______: The TOTAL of all DISCOUNT points CHARGED by the lender.
• _______: The BASE loan amount before the INCLUSION of financed PRIVATE MORTGAGE INSURANCE or equivalent and the amount of private mortgage insurance or equivalent.
• ______: The AMOUNT of any other NEW loans that will be obtained by the borrower and secured by the property at the SAME time as the SUBJECT loan.
• ______: The amount of borrowers costs PAID by the property SELLER (Credit to the Borrower)
• _______: The SUM of all PURCHASE credits in addition to those itemized under 2b.

Answer 113

A. Section L4
B. Borrower Closing Costs
C. Discount Points
D. Loan Amount
E. Other New Mortgage Loans on the Property
F. Seller Credits
G. Other Credits

Question 114

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Signing the Application:
Electronic Signatures:
The ______ Act regulates the use of electronic signatures and records in INTERSTATE and FOREIGN commerce. It ensures the VALIDITY and the LEGALITY of contracts and documents entered into by electronic methods. A party to a contract CANNOT be ______ to use electronic signature methods and may sign in INK with a pen, also called a “______.”

Answer 114

A. Electronic Signatures in Global and National Commerce (E-Sign)
B. forced
B. wet signature

Question 115

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Signing the Application:
Electronic Signatures:
Note that this provides FREEDOM for ONE party to use the _____ signature method and the other party to sign in ______. In the same manner, a person who chooses to sign electronically cannot be _____ legal effect, validity, or enforceability SOLELY because his signature is in an electronic format.

Answer 115

A. electronic
B. ink
C. denied

Question 116

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Signing the Application:
Electronic Signatures:
The consumer must receive disclosure information:
• Regarding his rights to have a _______ copy of the document provided to him.
• _______ when electronic signature consent APPLIES.
• Describing procedures to IMPLEMENT and ______ permission for electronic signatures on documents.
• Including a STATEMENT informing the consumer of the _____ and ______ requirements need on their computer to facilitate electronic signatures.

Answer 116

A. legible
B. Disclosing
C. withdraw
D. hardware and software

Question 117

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Signing the Application:
Electronic Signatures:
If a statute, rule, or regulation REQUIRES that a CONTRACT or other RECORD that contains electronic signatures or the authorization to sign electronically requires a _____ period, that condition is MET by the retention of the electronic record of the information in the contract. It must remain ACCESSIBLE to ALL parties who are entitled by law to ACCESS the documents.

Answer 117

A. retention period

Question 118

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Signing the Application:
Electronic Signatures:
A person can WITHDRAW his consent to electronic signatures at ______ during the process. Withdrawal of permission does NOT affect the ______ of previously executed documents that were electronically signed while the permission of the consumer was in effect.

Answer 118

A. any time
B. validity

Question 119

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
When is an Application an “Application?”
According to TILA/RESPA, a complete application is defined as the submission of a borrower’s financial information in anticipation of a credit decision relating to a federally-related mortgage loan that includes:
• ______ of the subject PROPERTY
• ______ AMOUNT applied for
• ______ calculated as GROSS monthly income
• ______ of the VALUE of the property
• Borrower’s legal ______
• ______ to obtain a CREDIT report
A COMPLETE application TRIGGERS federal DISCLOSURE requirements.

A. What is the acronym to remember what triggers a complete application?

Answer 119

REMEMBER: ALIENS
A. ADDRESS
B. LOAN
C. INCOME
D. ESTIMATE
E. NAME
F. SOCIAL Security number

Question 120

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Processing the Loan Application:
Once the application has been properly completed and the required disclosures have been delivered to and accepted by the borrower, the lender can begin gathering other pertinent information to VALIDATE the data. This task is often delegated to the loan processor.
A loan processor is the person who will independently _____ the information provided by the borrower. For example, a borrower states that she works for ABC Widget Company and provides an address and phone number for the company. The loan processor will verify the address and phone number from an independent source, such as a company website, white page listing, or other source, and will conduct a verbal VERIFICATION of employment or request via mail/email a written verification of employment. The oan processor gathers all the information and ______ the loan file into a PACKAGE that is PRESENTED to the _______ for evaluation who after their SECONDARY verification then presents it to the LENDER who makes the loan DECISION.

Answer 120

A. verify
B. assembles
C. underwriter

Question 121

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Processing the Loan Application:
Some loan processors accept a borrower’s check stubs or W-2 forms, copies of bank statements, and other documents to VERIFY ____ and ______. Others use verification forms that are sent to the borrower’s employer, banks, creditors and, on occasion, a PREVIOUS mortgage lender. A ____ report is obtained if NOT done at the time of pre-qualification by the MLO and a preliminary ______ report is ordered.

Answer 121

A. employment and income
B. credit
C. preliminary title

Question 122

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Processing the Loan Application:
An approved _____ is also contacted to appraise the property. They were initially mandated by the Federal Deposit Insurance Corporation (FDIC) rather than independent appraisers and are now regulated by the ______ pursuant to specific AMC guidelines and rules.

Answer 122

A. Appraisal management companies (AMC’s)
B. Consumer Finance Protection Bureau (CFPB)

Question 123

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
Processing the Loan Application: The guidelines require that appraisers have _______ from other parties and regulate LIMITED MLO communication with the appraisal firm when placing an order for the property appraisal i.e., an MLO cannot ______ contact an appraiser/cannot place an order.

Answer 123

A. independence
B. directly

Question 124

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
The Four C’s of Underwriting:
A borrower’s ability to qualify for a mortgage loan depends on MANY factors related to income, credit history, and assets. There are guidelines for determining what sufficient income for a given housing expense is, it would be wrong to apply these figures too rigidly. ALL aspects of the borrower’s financial situation must be CONSIDERED before a loan decision is made. ____, _____, and, _____ of income are important. A borrower with a HIGHER ______ ratio may still qualify for a loan if they have substantial assets, indicating an ability to effectively manage their financial affairs.

Answer 124

A. Quality, quantity, and durability
B. Total debt-to-income Ratio

Question 125

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
The Four C’s of Underwriting:
Strong earnings and substantial assets may NOT be enough to offset the damage caused by POOR CREDIT paying habits. A borrower must be BOTH able and willing to pay the housing expense.
A borrower who makes LARGE _____ in their property is far LESS likely to ______ than those with LITTLE or NO ____. That is why _____% down payments on NEW home purchases are the industry STANDARD and anything less than that usually involves a ______ requirement by the lender.

Answer 125

A. investments
B. default
C. no equity
D. 20%
E. mortgage insurance

Question 126

The Mortgage Lending Process:
Completing the Uniform
Residential Loan
Application (URLA):
The Four C’s of Underwriting:
When evaluating an application for a loan, underwriters or lenders consider the “4 C’s of Underwriting:”
• ______: history of the borrower, which demonstrates a borrower’s diligence in REPAYING debt
• ______: to repay the loan, which includes INCOME and EMPLOYMENT history and history of debt MANAGEMENT
• ______: assets which are REQUIRED funds available to CLOSE the mortgage
• ______: which evaluates the VALUE of the home being PURCHASED or REFINANCED

Answer 126

A. Credit
B. Capacity
C. Cash
D. Collateral

Question 127

The Mortgage Lending Process:
Income:
Before deciding if a borrower has sufficient income to qualify for a loan, the underwriter must decide what portion of the borrower’s total verified earnings are ACCEPTABLE as a part of the STABLE total monthly income. This is accomplished by studying the _____ of the income source(s)and the probability that the income will _____.

Answer 127

A. dependability
B. continue

Question 128

The Mortgage Lending Process:
Income:
• _______ : the monthly income that can reasonably be expected to continue in the future, is generally meant to include the ____ base income of the borrowers) from a ____ job(s).

Answer 128

A. Stable monthly income
B. gross
C. primary

Question 129

The Mortgage Lending Process:
Income:
Secondary Sources of Income:
Predictable earnings from acceptable secondary sources are considered if a lender’s thorough analysis determines they can be substantiated and are _____.

Answer 129

A. durable

Question 130

The Mortgage Lending Process:
Income:
Secondary Sources of Income: Secondary sources of income include, but are not limited to, the following:
• Bonuses
• _____ above base salary
• Part-time earnings
• Overtime
• _______ payments
• Social Security
• Pensions
• Retirement payments
• Auto allowance
• Foster care
• Capital gains
• Interest-yielding investments
• Rental income
• Alimony
• Child support
• Maintenance
• _____ income
• Housing/parsonage allowance
• ____ disability compensation
• Unemployment or _______ if verifiable, continuous, and ongoing

Answer 130

A. Commissions
B. Disability
C. Boarder
D. VA
E. welfare

Question 131

The Mortgage Lending Process:
Income:
Secondary Sources of Income:
• A _______ source of income is reasonably RELIABLE , such as income from an ESTABLISHED employer, GOVERNMENT agency, interest-YIELDING INVESTMENT account, etc.
• A _____ source of income can be expected to CONTINUE for a SUSTAINED period. PERMANENT disability, RETIREMENT earnings, and interest on ESTABLISHED investments are durable types of income.
NOTE: ______ unemployment benefits are NOT likely to be counted.

Answer 131

A. quality
B. durable
C. Temporary

Question 132

The Mortgage Lending Process:
Income:
Bonuses, Commissions, and Part-Time Earnings:
To be considered ____, other types of income like bonuses, commissions, and part-time earnings must be shown to have been a consistent part of the borrower’s earnings for at MINIMUM of ____ years. Earnings LESS than this is considered ____ but may be used to JUSTIFY a higher qualifying ratio.

Answer 132

A. durable
B. two
C. unstable

Question 133

The Mortgage Lending Process:
Income:
Bonuses, Commissions, and Part-Time Earnings:
Proof of _____ of income can be shown by submitting copies of W-2 forms, pay stubs, or FEDERAL income tax returns. The lender may send the employer a REQUEST for ____ of employment earnings and the likelihood of CONTINUANCE for at least _____ years.

Answer 133

A. consistency
B. verification
C. Three

Question 134

The Mortgage Lending Process:
Income:
Calculating Inconsistent Income:
If _____ income commission, self-employed, bonus, overtime, etc. must be established as DURABLE. To do so, follow the table:
If Your Calculations Determine:
• The most RECENT year’s income is _____ than the PREVIOUS year’s income: The CURRENT , higher year income is ______ over a ____-month period.
Q: What is the Formula to Calculate INCREASING Inconsistent Income?

Answer 134

A. sporadic / inconsistent
B. higher
C. averaged
D. 12
E. Total income for the RECENT year ÷ 12

Question 135

The Mortgage Lending Process:
Income:
Calculating Inconsistent Income:
If sporadic income; commission, self-employed, bonus, overtime, etc. must be established as DURABLE. To do so, follow the table:
If Your Calculations Determine:
• The most RECENT year’s income is _____ than the PREVIOUS year’s income:
The income for BOTH years must be _____ and averaged over a ___-month period.
An explanation of the DECLINING income will likely be REQUIRED by the underwriter, and if NOT acceptable, the loan request may be ____.

Q: What is the Formula to Calculate DECLINING Inconsistent Income?

Answer 135

A. lower
B. combined
C. 24 month
((Previous year income + recent year income) ÷ 24)
D. declined

Question 136

The Mortgage Lending Process:
Income:
Overtime:
Overtime earnings technically are eligible to count as part of a borrower’s qualifying monthly gross income but many underwriters are reluctant to rely on such earnings because their _____ is uncertain. When qualifying a buyer, overtime earnings should NOT be counted unless they show a ______ pattern. If substantiated, refer to the Calculating Inconsistent Income table just referenced.

Answer 136

A. durability
B. consistent

Question 137

The Mortgage Lending Process:
Income:
Disability Payments:
Disability payments count as income if they are a ____ source of income, but lenders must use caution if the disability payments are only for a LIMITED time. If the benefits have a defined _____, the remaining term should be at LEAST ____ years from the date of the mortgage application.

Answer 137

A. permanent
B. expiration date
C. three

Question 138

The Mortgage Lending Process:
Income:
Disability Payments:
____ Bulletin 2014-03 PROHIBITS a creditor from discriminating against an applicant because of the _____ of her income, whether part or all of it comes from public assistance. In this bulletin, the CFPB also addresses the documentation requirements for ______ disability income and Social Security ______ income.

Answer 138

A. CFPB
B. source
C. Social Security
D. Annuity

Question 139

The Mortgage Lending Process:
Income:
Disability Payments:
Verification of disability income can include that a borrower may NEED to provide PROOF of the ______ of income; however it is a VIOLATION of anti-discriminatory laws to impose ADDITIONAL documentation requirements for disability income than would be requested for OTHER types of income.

Answer 139

A. continuity

Question 140

The Mortgage Lending Process:
Income:
Disability Payments:
Creditors and the MLO should review the borrower’s disability _____ letter to determine IF the disability income is ____ or _____.
NOTE. NOT all disability payments are income tax-free.

Answer 140

A. Award Letter
B. Taxed or Non-Taxable

Question 141

The Mortgage Lending Process:
Income:
Social Security:
Social Security income counts as _______ income for a borrower who has reached ______ age. If these payments are the result of a disability or some other condition, the lender treats them like other disability payments and requires NO greater amount of ______ than what is IMPOSED on a REGULAR -paid employee.

Answer 141

A. permanent
B. retirement
C. documentation

Question 142

The Mortgage Lending Process:
Income:
Pensions and Retirement Benefits:
Lenders generally consider _____ and _____ benefits in the elderly community as stable income, although they may investigate the source to determine the ______ of the income.

Answer 142

A. pension and retirement
B. solvency

Question 143

The Mortgage Lending Process:
Income:
Auto Allowance:
An auto allowance is a specific amount an employer gives an employee for the business use of the company car every month. This amount of REIMBURSEMENT may be OFFSET by deducting the employee’s _____ for use of the auto from the auto allowance. The remaining amount is considered TAXABLE income by the IRS and, when _____ for the previous ____ years IT IS considered stable ______ that CAN be used for loan qualification.

Answer 143

A. actual expenses
B. averaged
C. two
D. income

Question 144

The Mortgage Lending Process:
Income:
Foster Care Income:
Qualifying payments for foster care are generally NOT _____, according to IRS Publication #____. To be EXCLUDED from income, foster care payments MUST have been received from a STATE or local GOVERNMENT agency or a qualified PLACEMENT organization for care provided in the taxpayer’s home.

Answer 144

A. Taxable
B. IRS Publication 525

Question 145

The Mortgage Lending Process:
Income:
Foster Care Income:
Foster care income is considered a _____ to the foster parents.
To fully document the income for use in loan qualification, an MLO must:
• Obtain a _____ from the state agency caseworker to substantiate the foster worker’s placement and that the placement of children will be _____.
• Document receipt of reimbursement for the previous _____ months. Because the income will likely be sporadic and change monthly, use a ____-month average and calculate using the inconsistent income calculation.
• Place a letter in the loan _____ from the borrower stating they intend to continue with foster care.

Answer 145

A. reimbursement
B. letter
C. ongoing
D. 24
E. 24
F. file

Question 146

The Mortgage Lending Process:
Income:
Capital Gains:
Almost everything monetarily OWNED and used for PERSONAL or INVESTMENT purposes is considered a ______.
Examples include: a HOME, personal-use items like household FURNISHINGS, and STOCKS or BONDS held as investments. NOTE: When a capital asset is SOLD, the ______ between the adjusted basis in the ASSET and the amount REALIZED from the SALE of the asset is a capital ____ if the amount is POSITIVE or a capital ____ if the amount is NEGATIVE.

Answer 146

A. capital asset
B. Difference
C. gain
D. loss

Question 147

The Mortgage Lending Process:
Income:
Capital Gains:
A person who buys a ______, such as a share of STOCK or expensive MACHINERY, and then sells the asset at a later date is required to file IRS: Form _____ for recording INCOME and LOSS from capital gains. The capital gain income should show a monthly average for the previous ___ years.

Answer 147

A. capital asset
B. Form D [D-liver the Gains
C. two

Question 148

The Mortgage Lending Process:
Income:
Interest-Yielding Investments:
When ______ are SOUND and interest payments are CONSISTENT, then lenders will consider this ____ income.
If investments are the source of funds used for the _____, this income must be DEDUCTED in proportion to The amount that is used for the loan closing. This income will likely be found on the IRS Form: Schedule ____.

Answer 148

A. investments
B. durable
C. down payment
D. Form Schedule B

Question 149

The Mortgage Lending Process:
Income:
Rental Income:
Income from rental properties can be counted if a ____ PATTERN of positive CASHFLOW can be VERIFIED. Cash flow is money that is immediately _____ to an individual on a REGULAR basis after SUBTRACTING all monthly _____. Rents from Rental Income must cover ALL expenses and mortgage payments for all properties while still leaving _____ cash available for the owner.

Answer 149

A. stable
B. available
C. expenses
D. excess

Question 150

The Mortgage Lending Process:
Income:
Rental Income:
Since 100% occupancy of all RENTAL units at all times is RARE, underwriters infer a ____% VACANCY rate and will only allow ____% of the net income to be used as EFFECTIVE income. Tax returns are used for verifying rental income and ______. If rental income is NOT reported on current tax returns, documentation providing signed rental _____ and PITI documentation of payments received from renters must be obtained.
Q: What is the formula to determine the amount of rental income that may be counted?

Answer 150

A. 25%
B. 75%
C. Rental expenses
D. leases
E. (Gross Rental Income - PITI) × 75% or 0.75 = Net Income

Question 151

The Mortgage Lending Process:
Income:
Alimony, Child Support, and Maintenance:
Alimony, child support, and/or maintenance can be considered part of the borrower’s monthly qualifying income if it’s determined they are likely to be made on a _____ basis. Such a determination is dependent upon whether the payments are required by a written ____ or a court _____, the LENGTH of time the payments have been received, the AGE of the child because child support payments generally stop at age ____, the overall financial and credit status of the payer, and the ABILITY of the borrower to _____ child support payments IF necessary e.g., through a court order.
NOTE: It should be expected to continue for a MINIMUM of _____ years to be used in income calculations.

Answer 151

A. consistent
B. agreement
C. decree
D. 18
E. compel
F. three

Question 152

The Mortgage Lending Process:
Income:
Alimony, Child Support, and Maintenance:
Alimony, child support, and maintenance does NOT need to be listed as a source of income if a borrower does NOT want it considered for the loan, per _____.
A copy of the _____ decree is generally sufficient to establish the AMOUNT and the ENFORCEABILITY of the required payments. To VERIFY receipt of income, the borrower must VERIFY child support payments by ____ months of canceled checks or _____ months’ consecutive bank statements showing child support/alimony deposits.

Answer 152

A. ECOA
B. divorce
C. 6
D. 6

Question 153

The Mortgage Lending Process:
Income:
Alimony, Child Support, and Maintenance:
Child support income for:
• _______ children are NOT taxed and, therefore, is NOT included on TAX returns. This _____ income MAY be GROSSED up by as much as _____% depending on the loan product type and the lender.
• ______ children ARE listed on ____ returns, and so are ALIMONY income.

Answer 153

A. Dependent
B. non-taxable
C. 125%
D. Non-dependent
E. tax

Question 154

The Mortgage Lending Process:
Income:
Unemployment and Welfare:
When considering whether income from unemployment or welfare can be counted as _____ income, the MLO should ask these questions:
• Is it ______? Can it be proven that the income was _____?
• Is it _______? Has this income stream been regular for ____ years?
• Is it _______?-Is this income stream likely to continue for at least ____ more years?

Answer 154

A. stable
B. verifiable
C. received
D. continuous
E. two
F. ongoing
G. three

Question 155

The Mortgage Lending Process:
Income:
Unemployment and Welfare: CAUTION: MLOs may NOT discriminate against a borrower based on receipt of _______.

Answer 155

A. public assistance

Question 156

The Mortgage Lending Process:
Income:
Unemployment and Welfare: Case in Point:
Borrower A has worked as a groundskeeper for _____ years at a golf course. Every winter, he is laid off and receives unemployment. He gets a W-2 from the unemployment office each year. His unemployment income should be considered as _______ income.
Borrower B has a six-year-old son and receives aid for dependent children. This _____ be considered as stable income if the borrower chooses to include it in the application.

Answer 156

A. 5 years [BC more than 3 years]
B. stable
C. CAN

Question 157

The Mortgage Lending Process:
Income:
Boarder Income:
Income from a boarder at the borrower’s principal residence or second home is NOT considered acceptable stable income EXCEPT:
• When a borrower with a DISABILITY receives rental income from a _______ assistant, even if that individual is a RELATIVE of the borrower. The rental payments can be considered as acceptable stable income in an amount up to ___% of the _____ gross income used to qualify the borrower for the mortgage loan. Personal assistants typically are paid with ______ Waiver funds, which also cover room and board from which rental payments are made to the borrower.

Answer 157

A. live-in personal
B. 30%
C. TOTAL
D. Medicaid Waiver

Question 158

The Mortgage Lending Process:
Income:
Boarder Income:
• For ______ mortgages:
Eligibility requirements include an ADDITIONAL exception. See B5-6, HomeReady Mortgage in the Fannie Mae Selling Guide at https://www.fanniemae.com.

Answer 158

A. HomeReady

Question 159

The Mortgage Lending Process:
Income:
Housing/Parsonage Allowance:
Housing or parsonage income may be considered qualifying income if there is DOCUMENTATION that the income has been received for the most RECENT ____ months and the allowance is likely to continue for the next _____ years. The housing/parsonage allowance MAY be added to INCOME but may NOT be used to OFFSET the _____ housing payment.
NOTE: This requirement does NOT apply to _____ allowance. For information on military housing, Base Pay (Salary or Hourly), Bonus, and Overtime Income in the Fannie Mae Selling Guide.

Answer 159

A. 12 months
B. three
C. monthly
D. military quarters’

Question 160

The Mortgage Lending Process:
Income:
Veteran Benefits Income:
Veterans may receive various forms of benefits from the Department of Veterans Affairs (VA). While military PENSION, ______ benefits, and other similar stable and durable forms of PAYMENT are considered EFFECTIVE stable income.
NOTE: _______ are NOT considered acceptable INCOME as they are OFFSET by education expenses.

Answer 160

A. SURVIVOR
B. VA education benefits

Question 161

The Mortgage Lending Process:
Income:
Verification of Veteran Benefits Income:
The MLO must document the borrower’s receipt of veteran benefits via a _____ or _____form from the VA, including verifying that the income can be expected to CONTINUE for a MINIMUM of _____ years from the date of the mortgage ______.

Answer 161

A. COE or DD-214
B. three years
C. application

Question 162

The Mortgage Lending Process:
Income:
Self-Employment Income:
To qualify with SELF-EMPLOYMENT income:
• The borrower must OWN at least ____% of the business.
• Self-employed borrowers need to provide personal and business entity _____ returns for a MINIMUM of ____ years.
• The lender may also ask to see financial statements, which are documents that show _____ and ______ for an individual or an entity, such as a company for a specific PERIOD or POINT in time.
• Verification of funds using ____ and _____ statements and/or ______ sheets may also be REQUIRED.

Answer 162

A. 25%
B. tax
C. two
D. assets
E. liabilities
F. Profit and loss
G. balance

Question 163

The Mortgage Lending Process:
Income:
Self-Employment Income: Secondary market guidelines generally require a self-employed borrower to have operated the business PROFITABLY for at least _____ years. If a borrower has been self-employed for _____ than two years, it is DIFFICULT to qualify for a loan.

Answer 163

A. two
B. less

Question 164

The Mortgage Lending Process:
Income:
Self-Employment Income:
However, someone with a shorter history of self-employment ____ to ____ years MAY be approved if the borrower’s most recent signed federal income tax returns reflect income:
• At the SAME or HIGHER level in a field providing the SAME products or services as the _____ business.
• In an occupation in which the borrower had SIMILAR _______ to those undertaken in connection with the CURRENT business.
In such cases, the lender must give CAREFUL consideration to the nature of the borrower’s level of experience and the amount of _____ the business currently has on their balance sheet.
For this CIRCUMSTANCE, an MLO would use the guidelines for calculating _____ income.

Answer 164

A. one to two
B. current
C. current responsibilities
D. Debt
E. inconsistent

Question 165

The Mortgage Lending Process:
Income:
Considering Nontaxable Income:
If a lender can verify that a regular source of a borrower’s income is _____ income such as child support payments, Social Security benefits, disability retirement payments, workers’ compensation benefits, certain types of public assistance payments, and food stamps–and is likely to continue, they may develop an _____ gross income for the borrower by ADDING up to _____% of the nontaxable income to the borrower’s income, according to the Fannie Mae Selling Guide.

Answer 165

A. nontaxable
B. ADJUSTED gross
C. 25%

Question 166

The Mortgage Lending Process:
Income:
Considering Nontaxable Income:
This process may be described as “GROSSING UP.” The Selling Guide goes on to indicate:
“If the actual amount of federal and state taxes that would generally be paid by a wage earner in a similar tax bracket is MORE than ____% of the borrower’s nontaxable income, the lender MAY use that amount to DEVELOP the ____ gross income, which should be used in calculating the borrower’s qualifying ratio.
Caution: Not all disability, workers’ comp, and other payments are NON-TAXABLE. If they are TAXED, they CANNOT be “_______.”

Answer 166

A. 25%
B. adjusted
D. Grossed Up

Question 167

The Mortgage Lending Process:
Income:
Evaluating Income:
Keep in mind a lender’s guidelines toward CERTAIN kinds of income, it’s still important to remember that each TYPE of INCOME is evaluated ______ by the underwriter When deciding which income COUNTS toward a home mortgage, the underwriter takes EACH individual income source and looks at employment history, advancement, and education/training in deciding the _____ of each position ESPECIALLY for the borrower’s PRIMARY job.

Answer 167

A. separately
B. strength

Question 168

The Mortgage Lending Process:
Income:
Employment History:
When evaluating the elements of a borrower’s income like the quantity, quality, and durability, the underwriter analyzes the individual’s employment _____. A borrower with a history of steady, full-time employment is given more FAVORABLE consideration than one who has changed employers frequently UNLESS the changes are properly EXPLAINED.

Answer 168

A. stability

Question 169

The Mortgage Lending Process:
Income:
Employment History:
Generally, a borrower should have continuous employment for at least _____ years in the SAME field.
However, every borrower is unique and if there is NOT an established two-year year work history, there may be EXPLAINABLE circumstances that would warrant loan APPROVAL, such as having recently finished ______ or being recently discharged from ____ service.

Answer 169

A. two
B. college
C. military

Question 170

The Mortgage Lending Process:
Income:
Employment History:
• _______: When a borrower has changed employers frequently for the sake of ADVANCEMENT and/ or can show a stable and reliable flow of PREDICTABLE income, the underwriter will NOT likely view these changes negatively.
NOTE: Persistent job-hopping without MAINTAINING income flow or SHOWING advancement usually signifies a problem of some kind; in this case, an underwriter tends to regard the individual’s earnings as _____.

Answer 170

A. Advancement
B. unstable

Question 171

The Mortgage Lending Process:
Income:
Employment History:
• _______ : Special education or training that prepares a person for a specific job such as a nurse or medical doctor can _____ a loan application.
Such education or training can offset minor ______ in the employment history with respect to earnings or job tenure, especially if the underwriter is convinced of continuing DEMAND for people, job STABILITY , or opportunity for ADVANCEMENT in this line of work.

Answer 171

A. Education and Training
B. strengthen
C. weaknesses

Question 172

The Mortgage Lending Process:
Income:
Verifying Standard
Employment Income:
The borrower can substantiate employment and income by providing:
• ____ forms for the previous ____ years.
• _____ stubs for the previous ____-day period.

Answer 172

A. W-2 Forms
B. two years
C. Payroll
D. 30 Day

Question 173

The Mortgage Lending Process:
Income:
Verifying Standard
Employment Income:
Since federal labor regulations promulgated by the Department of Labor and the Equal Employment Opportunity Commission require employers to keep payroll records for _____ years, if the borrower cannot locate pay stubs or W-2s, it may be possible to get copies directly from the EMPLOYER.

Answer 173

A. three

Question 174

The Mortgage Lending Process:
Income:
Verifying Standard
Employment Income:
Pay stubs must identify the BORROWER, EMPLOYER, and the borrower’s GROSS income for the CURRENT ______ AND ______. Pay stubs may also reveal other factors that could impact the mortgage application, such as ____ or _____ loans.

Answer 174

A. current pay period
B. year-to-date
C. garnishments or 401K

Question 175

The Mortgage Lending Process:
Income:
Verifying Standard
Employment Income:
Verbal employment confirmations are normally completed for each borrower prior to closing.
_____ forms may also be used to verify income and employment history. MLOs should caution a borrower at the time of application regarding the COMPLICATIONS that might arise if _____ occur during the application process.

Answer 175

A. Verification of Employment (VOE)
B. job changes

Question 176

The Mortgage Lending Process:
Income:
IRS Form 4506-T:
UNDERWRITERS generally require the LENDER to obtain a completed and signed Form _____ from the borrowers at application. This form gives the lender permission to request electronic transcripts of _____ from the IRS when documenting the borrower’s income. Under current requirements, the lender determines WHEN to submit the form to the IRS or for when the designee to ____ the tax information.

Answer 176

A. Form 4506-T
B. federal tax returns
C. obtains

Question 177

The Mortgage Lending Process:
Income:
IRS Form 4506-T:
These transcripts are used to VALIDATE the borrower’s income AGAINST their W-2s, thereby helping to reduce instances of mortgage _____. Many lenders have some level of ______ control audit procedures where a RANDOM number of loan files are pulled for REVIEW; sometimes this is done PRIOR to closing, and sometimes AFTER closing. The lender must submit the IRS Form _____ to get access to these tax documents.

Answer 177

A. fraud
B. quality control
C. Form 4506-T

Question 178

The Mortgage Lending Process:
Income:
IRS Form 4506-T:
Because the IRS Form _____ is valid for only _____ days, some lenders also ask borrowers to sign a ____ form prior to closing so that tax information may be accessed as part of the quality assurance process, and make sure no new items arise if necessary.

Answer 178

A. Form 4506-T
B. 90
C. second

Question 179

The Mortgage Lending Process:
Income:
Computing Monthly Income:
After determining which incomes count towards _____, ALL gross monthly income from those sources is ADDED together to arrive at a TOTAL gross monthly income figure.
If a borrower earns an hourly wage, it must be converted to a monthly figure.
To convert a borrower’s hourly wages to monthly earnings:
1. ______ the hourly wage by the number of hours worked in a week.
2. ______ that number by 52 (weeks in a year).
3. Then ______ by 12 (months in a year). This gives you their monthly gross income.

Answer 179

A. stable monthly income
B. Multiply
C. Multiply
D. Divide

Question 180

The Mortgage Lending Process:
Credit History:
Credit history is a RECORD of debt _____ detailing how a person PAID credit accounts in the PAST and is used as a GUIDE to determine whether the borrower is LIKELY to pay accounts on TIME and as AGREED in the ______.

Answer 180

A. debt repayment
B. future

Question 181

The Mortgage Lending Process:
Credit History:
A debt is simply MONEY ____. When evaluating a borrower’s credit history, however, a debt is generally considered if it is a SECURED or UNSECURED recurring monetary obligation that will NOT be CANCELED until paid in FULL:
• A car lease is considered a _____; so is a student loan or court-ordered child support.
• Utilities and automobile and health insurance premiums are ______ considered DEBTS because they can, in theory, be ______. Lenders assume borrowers would turn off their phones or cable service before losing their houses.
• Gray areas can include such things as doctor bills.
These are generally NOT considered to be debt UNLESS there is a _____ (e.g., for braces).

Answer 181

A. owed
B. DEBT
D. NOT
E. CANCELED
F. payment schedule

Question 182

The Mortgage Lending Process:
Credit History:
Borrowers must inform a lender of ALL debts even things that may NOT show up on a _______.

Answer 182

A. credit report

Question 183

The Mortgage Lending Process:
Credit History:
As part of the loan evaluation, the underwriter analyzes the borrower’s and any co-borrower’s credit HISTORY by obtaining a credit REPORT from a NATIONAL credit reporting company e.g., Experian, Equifax, and TransUnion.
NOTE: If the credit history shows a _____ payment record or other DEROGATORY credit information such as a LAWSUIT, JUDGEMENT, REPOSSESSION, COLLECTION, FORECLOSURE, or BANKRUPTCY), a loan application could be _____ or the borrower put into the HIGH-RISK ____ credit category.

Answer 183

A. Slow
B. declined
C. B-C credit

Question 184

The Mortgage Lending Process:
Credit History:
In some cases, derogatory ratings DO NOT prevent a borrower from obtaining a loan if the credit problems can be _____. The underwriter must be SATISFIED that these problems don’t represent a neglectful overall attitude toward credit obligations and that the circumstances were TEMPORARY and NO longer exist.

Answer 184

A. explained

Question 185

The Mortgage Lending Process:
Credit History:
Real Success:
If a borrower’s credit report is laced with derogatory ratings over a period of years, there’s probably little hope for loan approval through a traditional lender. Perpetual credit problems more likely reflect an _____ instead of a circumstance, and it’s reasonable for lenders to presume that pattern will continue. All credit problems can be resolved with time, however, so never assume a borrower can’t qualify for a loan eventually.

Answer 185

A. attitude

Question 186

The Mortgage Lending Process:
Credit History:
Real Success:
When evaluating a borrower’s credit history, lenders use many methods, including objective evaluation methods to ensure compliance with the _____ Act. This Act prohibits discrimination in lending based on age (except minors under 18), sex, race, marital status, color, religion, national origin, or receipt of public assistance.
An MLO must never discourage an applicant from submitting a mortgage application because of their membership in a _____ which is enforced by the ___ ACT.

Answer 186

A. Equal Credit Opportunity Act (ECOA)
B. protected class

Question 187

The Mortgage Lending Process:
Credit History:
Credit Scoring:
Credit SCORING is an OBJECTIVE means of determining the creditworthiness of potential borrowers based on a ______ scoring system.

Answer 187

A. Numerical

Question 188

The Mortgage Lending Process:
Credit History:
Credit Scoring:
A credit SCORE is a ______ representation of the borrower’s credit PROFILE compiled by assigning specified NUMERICAL values to DIFFERENT aspects of the borrower’s credit MAKEUP. These numbers are adjusted UP and DOWN based on the strengths and weaknesses of particular qualifications. The numbers are computed from all CATEGORIES using an ALGORITHM and a credit _____ based on these criteria is assigned.
For Example: a person with a _____ line of AVAILABLE credit that is HARDLY USED would likely have a HIGHER credit score than a person with ______ credit LIMITS but whose credit cards are all MAXED out which would cause a LOWER credit score.

Answer 188

A. number
B. Score
C. HIGHER
D. LOWER

Question 189

The Mortgage Lending Process:
Credit History:
Credit Scoring:
Credit scores also play an important role in AUTOMATED UNDERWRITING since Fannie Mae and Freddie Mac have identified a STRONG correlation between OVERALL ______ and CREDIT SCORES.
• The ______ the credit score, the better the credit risk for the lender.
• The _____ the credit score, the higher the risk of DEFAULT.
Credit reports and scores are typically obtained from a national credit reporting company. The main national credit reporting companies are:
•
•
•

Answer 189

A. mortgage performance
B. HIGHER
C. LOWER
D.
a. Experian
b. Equifax
c. TransUnion.

Question 190

The Mortgage Lending Process:
Credit History:
Credit Scoring Systems:
Credit scores are the result of very complex CALCULATIONS carried out by a computer that considers EVERY aspect of the borrower’s credit FILE. There are many different names for CREDIT SCORING SYSTEMS. The scoring system that MOST consumers are likely to recognize is called the ______ which was developed by FAIR, ISAAC & CO. Other common names for credit scoring systems include _____ used by Equifax and ______ used by TransUnion.

Answer 190

A. FICO®
B. BEACON®
C. EMPERICA®

Question 191

The Mortgage Lending Process:
Credit History:
Credit Scoring Systems:
Items considered by a credit scoring system include:
• Number of _____ accounts
• TOTAL credit limit
• TYPES of credit e.g., credit cards, installment loans
• _______ of credit history (e.g., when opened, latest activity)
• Total amount of DEBT outstanding
• Number of LATE payments in the past 30-60-90 days
• Presence of adverse ______ records (e.g., liens, judgments, bankruptcies)
• Number of recent credit INQUIRIES
• Re-establishment of POSITIVE credit history after PAST payment problems
Credit scoring systems do NOT consider items such as a consumer’s race, sex, age, marital status, religion, national origin, salary, or employment history.

Answer 191

A. open
B. Length
C. public

Question 192

The Mortgage Lending Process:
Credit History:
Credit Scoring Systems:
Each of the three main credit bureau scores is calculated a little differently. For example, _____ weighs PAYMENT HISTORY as _____% of the total score, amounts OWED as ____%, LENGTH of credit history as ____%, and NEW credit and TYPES of credit used as _____% each.

Answer 192

A. FICO®
B. 35%
C. 30%
D. 15%
E. 10%

Question 193

The Mortgage Lending Process:
Credit History:
Credit Scoring Systems:
Regardless of the actual calculation, all credit bureaus produce similar credit scores, which range from about ____ to ______. While lenders can’t tell you exactly how each credit score is computed, they will disclose at what _____ of credit scores they CAN use in qualifying a borrower for various mortgage loan programs through their lender.

Answer 193

A. 300 to 850
B. cutoff

Question 194

The Mortgage Lending Process:
Credit History:
Credit Scoring Systems:
Secondary Market:
The secondary market renders pricing ADJUSTMENTS to the borrower’s INTEREST RATE based on their credit ____ and ____. Fannie Mae and Freddie Mac guidelines generally consider those with credit scores:
• Above _____ as an ACCEPTABLE credit risk and, therefore, have LITTLE interest rate ADJUSTMENT.
• Between _____ and _____ as MARGINAL and held to a more COMPREHENSIVE review.
• Below _____ as HIGH RISK. Fannie Mae and Freddie Mac do NOT accept these loans except for certain products and programs.
Before making decisions regarding qualification, lenders are encouraged to check the accuracy of credit information.

Answer 194

A. credit score and LTV
B. 720
C. 620 and 720
D. 620

Question 195

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
Most people try to make their credit obligations on time; when they don’t, there’s usually a reason. JOB loss, HOSPITALIZATION, prolonged ILLNESS, DEATH in the family, or DIVORCE can create financial pressures that affect debt paying HABITS. When a FEW derogatory items appear on a credit report, it MAY be possible to make a case that the problems occurred during a _____ period of time for understandable reasons and that PRIOR and SUBSEQUENT credit activity was GOOD.

Answer 195

A. specific

Question 196

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
However, if a borrower refuses to accept responsibility for their credit difficulties and instead blames them on misunderstandings or issues with creditors, underwriters may NOT look favorably upon such explanations.
Underwriters presume that a borrower’s ______ to take responsibility for prior credit problems is an indication of what can be expected in the future.

Answer 196

A. reluctance

Question 197

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
A borrower may have questions regarding their credit score. The ______ Act, as amended by Section _____ of the _______ Act of 2003 REQUIRES that a “NOTICE to the ______ Disclosure” is provided to a borrower.
This disclosure MUST include the borrower’s credit ______ that was reported to the home loan LENDER and the key FACTORS affecting the score. This disclosure MUST include the ______ information for any credit agency used so the borrower can reach out to clear up any issues that need to be disputed.

Answer 197

A. Fair Credit Reporting Act (FCRA)
B. Section 212
Fair and Accurate Credit Transactions Act (FACTA) of 2003
C. Home Loan Applicant Credit Score Information Disclosure
C. credit score
D. contact

Question 198

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit: Bankruptcy:
Bankruptcy, as established by Title 11 of the U.S. Code, is a court process that cancels debt and provides some relief for creditors. There are two basic proceedings for individuals:
• Chapter 7: Sometimes called a ______ or a ______. The debtor turns over all NON-EXEMPT property to the bankruptcy TRUSTEE who then _____ it to cash for DISTRIBUTION to the CREDITORS. The debtor receives a discharge of all DISCHARGEABLE debts, usually within ____ months.
An individual wishing to file this type of bankruptcy must meet certain TESTS related to income and debt.

Answer 198

A. straight bankruptcy
B. liquidation proceeding
C. CONVERTS
D. four

Question 199

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit: Bankruptcy:
Bankruptcy, as established by Title 11 of the U.S. Code, is a court process that cancels debt and provides some relief for creditors.
There are two basic proceedings for individuals:
• Chapter 13. This is filed by an individual who wishes to RETAIN the ______ property and prefers to PAY OFF the debt within the allowable timeframe of up to ____ years. It is only an option for those with a predictable income that is sufficient to pay reasonable expenses with some leftover to pay debts.

Answer 199

A. non-exempt
B. five

Question 200

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit: Bankruptcy:
According to the _____ Act, consumer reporting agencies may maintain bankruptcy information on a consumer’s credit report at MAX for NO more than ____ years from the date of entry of the order for relief or the date of adjudication.
Chapter _____ bankruptcies remain on the credit report for a MAXIMUM of TEN years after the discharge date.
Chapter ____ bankruptcies remain for SEVEN years after the discharge date.

Answer 200

A. Fair Credit Reporting Act (FCRA)
B. 10 years
C. Chapter 7
D. Chapter 13

Question 201

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit: Other Negative Information:
According to FICO®, other TYPES of NEGATIVE information that REMAIN on a consumer’s credit report for _____ years include:
• _____ payments
• _____
• _____ (generally depending on the AGE of the debt being collected)
Also, information that is part of the public record may show for seven years, although unpaid ____ liens can remain INDEFINITELY.

Answer 201

A. seven
B. Late
C. Foreclosures
D. Collections
E. TAX

Question 202

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
Bill Consolidation and Refinancing:
Even without derogatory ratings, lenders may find other concerns in a credit report that might indicate the borrower is a credit risk. If an individual’s credit pattern is one of continually increasing LIABILITIES and periodically bailing out through BILL CONSOLIDATION (BORROWING a larger sum of money to PAY OFF many smaller debts) and REFINANCING , the borrower may be classified as a ______ RISK. This pattern suggests a tendency to live BEYOND a prudent level. It is a SUBJECTIVE consideration likely to influence the lender’s decision if a borrower is ALSO WEAK in other areas, such as having a LOW _____ or _____ worth.

Answer 202

A. MARGINAL CREDIT RISK (amount of risk a borrower adds to a LENDERS portfolio if they decide to close the loan and assume the liability.)
B. Income
C. Net Worth

Question 203

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
Real Success:
Creditors who have a LEGITIMATE business need to ACCESS a potential borrower’s credit REPORT when a business transaction is INITIATED by the CONSUMER but may ONLY do so if they have ______ from the borrower. While some MLOs REQUIRE a separate _____ CONSENT from the borrower BEFORE obtaining a credit report.
Section ___ in Paragraph ___ of the URLA:
Acknowledgements and Agreements:
includes language that AUTHORIZES the creditor to ACCESS the borrower’s credit information from ANY source NAMED in the application or from a consumer reporting agency.

Answer 203

A. authorization
B. written
C. Section 6 In Paragraph 6

Question 204

The Mortgage Lending Process:
Credit History:
Explaining Derogatory Credit:
Real Success:
Although credit reports PROVIDED by a BORROWERS would NOT be ACCEPTABLE to lenders, the _____ Act allows consumers to request ONE ____ credit report per year from EACH of the national credit bureaus: Experian, Equifax, and TransUnion. A borrower should be ENCOURAGED to take advantage of this.
They are also entitled to a FREE report IF:
• If information in a credit report RESULTED in some sort of ____.
• If the consumer was a VICTIM of identity theft and a _____ was inserted in a credit file.
• If the credit file contains INACCURATE information because of _____.
• If the consumer is on public ASSISTANCE or ______.

Answer 204

A. Fair Credit Reporting Act (FCRA)
B. free
C. adverse action
D. fraud alert
E. fraud
F. unemployed

Question 205

The Mortgage Lending Process:
Assets:
Assets are simply items of ____. The underwriter takes the necessary steps to verify the nature and value of assets held by a borrower. If a borrower has a _____ total debt-to-income ratio, ABOVE AVERAGE assets can offset this weakness. Underwriters know that ASSETS, especially in _____ forms, such as savings or stocks and bonds, can be used to pay unexpected bills or to support a borrower when there’s a temporary interruption in income.

Answer 205

A. Value
B. Marginal
B. Liquid

Question 206

The Mortgage Lending Process:
Liquid versus Non-Liquid Assets:
LIQUID ASSETS are cash and any other assets–such as stocks or bonds that can quickly be _____ into cash.
Automated underwriting systems (AUSs) generally consider the following assets as liquid and include their value when evaluating a borrower’s:
• Checking accounts
• Savings accounts
• Certificates of deposit
• Money market funds
• Mutual funds
• Stocks and bonds
• Cash value of _____
• ____, if the borrower is the BENEFICIARY, TRUSTEE, or CO-TRUSTEE and the trust is an INTERVIVOS VIVOS REVOCABLE trust

Answer 206

A. converted
B. life insurance
C. Trust funds

Question 207

The Mortgage Lending Process:
Assets:
Liquid versus Non-Liquid Assets:
NON-LIQUID assets include:
• Cash deposits on the sales contract which is called ______
• Proceeds from the sale of a non-____ asset
• Proceeds from ANOTHER property being ______ ON or BEFORE closing of the SUBJECT property
• _____ equity
• Employer assistance
• Rent credit

Answer 207

A. earnest money
B. real estate
C. SOLD
D. Sweat

Question 208

The Mortgage Lending Process:
Assets:
Liquid versus Non-Liquid Assets:
GIFTS include:
Gift funds from a(n):
• Relative
• Unmarried partner
• Employer
• ______ borrowed funds
• Trade equity
• Unsecured borrowed funds
• Religious nonprofit
• Community nonprofit
• Federal, state, or local agency

Answer 208

A. Secured

Question 209

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Lenders and underwriters are MOST interested in the _____ PAYMENT, CASH _____, and other assets.

Answer 209

A. Down payment
B. Cash reserves

Question 210

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Down Payment:
It must be determined that the borrower has sufficient LIQUID assets to make the cash _____ payment and pay the CLOSING COSTS and other expenses incidental to the purchase of the property. Some programs allow a SMALLEE down payment mostly government programs or programs to assist a first-time home buyer. The LENDER also wants to know the _____ of the borrower’s down payment. SAVINGS or SALE of a PRIOR home are both ______ sources of down payment.

Answer 210

A. down payment
B. source
C. acceptable

Question 211

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Down Payment:
________: These funds must be secured or unsecured and the DEBT MUST be considered in the total debt-to-income ratio. Most lenders ONLY allow a SECURED loan for CLOSING COSTS to be obtained using the borrower’s _______ assets, such as a ____ or a ____ plan.

Answer 211

A. Borrowed Funds
B. Liquid
C. Roth IRA or a traditional 401K

Question 212

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Down Payment:
Gifts:
If an applicant lacks the necessary funds to close a transaction, a _____ of the required amount is usually ACCEPTABLE to the underwriter. The gift should be confirmed by means of a _____ signed by the DONOR. The letter should CLEARLY state that the money represents a gift and does NOT have to be ___.

Answer 212

A. gift
B. gift letter
C. repaid

Question 213

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Down Payment:
Gifts:
The gift is usually from a family member, but may be acceptable if made by others depending upon program guidelines, which can vary.
In addition to the gift letter, lenders want to VERIFY that the donor has the funds ______ in their bank to provide the gift by seeing a COPY of the _____, a recent ______ from the donor showing he has the ability to give the gift, and a COPY of the _____ showing funds have been deposited and are available for closing sourcing the funds.

Answer 213

A. available
B. gift check
C. bank statement
D. receipt

Question 214

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Down Payment:
Gifts:
In the past, down payment gifts have been an area of _____, so it is important to VALIDATE that the funds came from the account verified in the gift letter and bank statement provided by the donor.
Gifts include funds from a relative, unmarried partner, employer, _____ nonprofit, community nonprofit, and/or a federal, state, or local agency.

Answer 214

A. mortgage fraud
B. religious

Question 215

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Reserves:
This is _____ or other highly liquid assets a borrower will have available after the loan funds. Lenders would like to see at least enough to cover _____ months’ PITI mortgage payments of principal, interest, taxes, and insurance (and assessments such as condominium association fees, if applicable) after the borrower makes the down payment and pays all closing costs; however, in most cases, this is NOT required.

Answer 215

A. cash on deposit
B. two

Question 216

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Reserves:
For ______ properties, _____ months of PITI payments must be verified for loans on a ______ property. For conventional loans, when a borrower CONVERTS a PRIMARY residence that they have occupied during the past 12 months into an INVESTMENT property, if the equity in the property is less than ______%, they are required to have _____ of cash reserves for BOTH properties–the investment property and the principal residence.

Answer 216

A. investment
B. six
C. non-owner-occupied
D. 30%
E. six months

Question 217

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Other Assets:
Having other _____ in addition to cash and other liquid assets show that the borrower is able to MANAGE money and has RESOURCES, if needed, to handle emergencies and make mortgage payments.

Answer 217

A. assets

Question 218

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Other Assets:
Real estate _____ is an important ASSET to consider.
Equity is the difference between the market _____ of the property and the SUM of the _____ and ____ obligations against the property. Equity, less all selling expenses, is what a buyer should _____ from the sale of property.

Answer 218

A. equity
B. value
C. mortgages and liens
D. receive

Question 219

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Other Assets:
• If the equity from the sale of a home is the _____ of money for the purchase of the subject property, the UNDERWRITER might require evidence that the sale _____ and the borrower RECEIVED the _____ before making the new loan.

Answer 219

A. source
B. closed
C. proceeds

Question 220

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Other Assets:
• If the loan is a construction loan and the borrower has owned the lot for ____ months or more, the underwriter treats the borrower’s equity in that lot as _____ or its equivalent when determining the down payment needed.

Answer 220

A. 12
B. cash

Question 221

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Other Assets:
Other real estate also counts as assets, but ONLY the ____ in the property and NOT its total value contributes to net worth since it can be converted to ____ by selling an interest in or mortgaging the property. Real estate with ____ or ____ equity, or investment property with income that’s equal to or below expenses, HURTS a loan application more than it helps because the property may require cash from the borrower. Of course, a lender must be told of any financial obligations or expense shortfalls NOT covered by property rents.

Answer 221

A. equity
B. cash
C. little or no

Question 222

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Verifying Deposits for Down Payment/Reserves:
Documentation of assets includes _____ months of bank statements (all pages) to verify available funds. A ______ form may also be used to verify current and average bank statement balances.

Answer 222

A. two months
B. Verification of Deposit (VOD)

Question 223

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Verifying Deposits for Down Payment/Reserves:
When the underwriter reviews the bank statements or receives the completed VOD forms, four questions are considered:
1. Does the _____ information CONFIRM the statements in the loan application?
2. Is there enough _____ in the bank to pay the costs of buying the property?
3. Has the bank account been opened _____ (within the last few months)?
4. Is the present balance ____ HIGHER than the AVERAGE balance?

Answer 223

A. verified
B. money
C. recently
D. notably

Question 224

The Mortgage Lending Process:
Assets:
Evaluating Assets:
Verifying Deposits for Down Payment/Reserves:
Lenders prefer to see _____ funds, which means they have been in the account for the entire period covered by the bank statements of ____days. Recently opened accounts or higher-than-normal balances must be EXPLAINED as these are strong indications the applicant may have borrowed the funds. Also, the source of any large and unusual deposit will need to be _______.

Answer 224

A. seasoned
B. 60 days
C. documented

Question 225

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Providing funds to a borrower to purchase or refinance a home carries with it a great deal of financial RISK for the LENDER, who is said to have an _____ interest in the property. To protect that collateral, therefore, lenders normally require MORTGAGE INSURANCE.

Answer 225

A. insurable

Question 226

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Homeowner’s Hazard Insurance:
Homeowner’s Hazard Insurance is a policy that covers ____ or ____ to the home or property in the event of fire or other disasters such as a tornado, snow, and hail damage.
Lenders generally:
• Require the policy to be _____ to replace the home or reimburse the mortgage amount, with the _______ being named on the actual policy.

Answer 226

A. loss or damage
B. sufficient
C. lender

Question 227

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Homeowner’s Hazard Insurance:
AN INSURANCE POLICY that covers LOSS or DAMAGE to the home or property in the event of FIRE or other disasters such as a TORNADO, SNOW, and HAIL damage.
Lenders generally:
• Have the right to PLACE insurance on the property to COVER its INTEREST (the loan value) in the event of a loss if the borrower does NOT comply with the lender’s insurance REQUIREMENTS this is called ____ insurance.

Answer 227

A. force-placed insurance

Question 228

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Homeowner’s Hazard Insurance:
A policy that covers loss or damage to the home or property in the event of fire or other disasters such as a tornado, snow, and hail damage.
Lenders generally:
• Require borrowers to pay the first year’s insurance premium in ______ prior to closing.

Answer 228

A. full

Question 229

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Homeowner’s Hazard Insurance:
A policy that covers loss or damage to the home or property in the event of fire or other disasters such as a tornado, snow, and hail damage.
Lenders generally:
• Incorporate the _____ insurance cost along with current property taxes into an ______ account, which is PRORATED over the next ____ months to determine a monthly insurance and property tax payment amount. This is ADDED to the monthly principal and interest due for loan repayment. Upon payment each month, the insurance and taxes are ______ into the borrower’s escrow account. When property taxes and insurance become due, the lender/servicer PAYS the payment to the respective _____ on behalf of the property owner.

Answer 229

A. annual
B. escrow account
C. 12 months
D. deposited
E. recipients

Question 230

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Flood Insurance:
Homeowners hazard insurance does not cover damage caused by the peril of _____.
When a property is in a federally-designated special flood hazard area (SFHA), either Flood Zone ___ or Flood Zone ___, the lender for federal loans will REQUIRE a flood insurance policy for the LIFE of the loan in addition to the homeowners hazard insurance.

Answer 230

A. flood
B. Flood Zone A or Flood Zone V

Question 231

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Flood Insurance:
Flood insurance must be purchased from the _____ or from an insurer participating in the “______” program. In order to buy federal flood insurance, the property must be in a community that is VOLUNTARILY participating in the _____.

Answer 231

A. National Flood Insurance Program (NFIP)
B. Write Your Own
C. NFIP

Question 232

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Private Mortgage Insurance (PMI):
PMI is offered by private companies to INSURE a _____ against DEFAULT on a loan by a borrower where there is a LOSS of _____ VALUE at the time of the DEFAULT. Prior to the advent of PMI in the early 1970s, lenders would ONLY lend 80% of the value of a property, assuming that the 20% down payment was the incentive needed for the borrower to keep mortgage payments current.

Answer 232

A. lender
B. collateral

Question 233

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Private Mortgage Insurance (PMI):
Both ____ and _____ also REQUIRE private mortgage insurance whether lender-paid or third-party on home loans when the borrower puts LESS THAN ____% down. When insuring a loan, the mortgage insurance insurer SHARES the lender’s risk, but only PART of the risk. The insurer does NOT insure the ENTIRE loan amount, but rather the UPPER PORTION of the loan that EXCEEDS the standard ____% LTV. The amount of coverage can vary but is typically ___% to ___% of the loan amount.

Answer 233

A. Fannie Mae and Freddie Mac
B. 20%
C. 80%
D. 20% to 25%

Question 234

The Mortgage Lending Process:
Insurance and Escrow
Requirements:
Private Mortgage Insurance (PMI):
After the sale of the security due to foreclosure, the proceeds may NOT be _____ for the lender to reclaim all the lender’s ____ from the principal balance, foreclosure, and other costs. The lender may be able to pursue a ______ against the borrower for any losses, depending on state statutes. This is referred to as ______.

Answer 234

A. sufficient
B. losses
C. deficiency judgment
D. recourse

Question 235

The Mortgage Lending Process:
Underwriting:
There are general steps all lenders take before deciding whether to make a real estate loan and, if yes, on what terms. This EVALUATION process is called loan ______, this is where an underwriter evaluates the DOCUMENTATION, BORROWER information, and various RISK factors associated with a loan in order to make a decision.

Answer 235

A. underwriting

Question 236

The Mortgage Lending Process:
Underwriting:
Putting Together a Loan File:
To make any decision, however, the underwriter must have all the relevant data. Before submitting a loan file to underwriting, MLOs should review the application one last time. A good MLO takes _____ of the loan file, ensuring that the information in the submitted application is accurate, that all required documentation is included and complete, and that all readily identifiable issues that an underwriter might raise have been addressed. If a loan processor misses something, it’s the MLO’s job to fix it _____ it goes to the underwriter. The goal of the MLO should be to never have a loan file rejected as “______.”

Answer 236

A. ownership
B. before
C. incomplete

Question 237

The Mortgage Lending Process:
Underwriting:
Putting Together a Loan File:
Real Success:
There is no standardized order in which to assemble the loan file, although lenders may have a preference.
Submitting the loan file for final underwriting can usually be accomplished in an email, by courier, or by fax. When submitting a loan file by email or other electronic delivery, use a _____ transmission method to ensure the information is kept confidential and to prevent identity theft.

Answer 237

A. secure

Question 238

The Mortgage Lending Process:
Underwriting:
Putting Together a Loan File:
Real Success:
Also, it is a good practice to include a “______” letter and place it on TOP of the file. If the loan application has potential _____ that may concern the underwriter:
• UNSUAL circumstances
• odd letters of explanation
• strange income
Use the letter to prepare the underwriter for what’s coming. Let the underwriter know that you know where the issues are; if they find something strange, they may start DOUBTING the whole package.
Do anything you can do to make the process go smoothly.
In addition to the negative issues, ACCENT the ____ items of the loan file in your “Dear Underwriter” letter.

Answer 238

A. Dear Underwriter
B. issues
C. positive

Question 239

The Mortgage Lending Process:
Underwriting:
Putting Together a Loan File:
Real Success:
For the sake of your BORROWERS, find out how long the file will SIT in the REVIEW queue and WHEN they can EXPECT a DECISION. It is stressful waiting to hear back so keep your borrowers INFORMED to ALLEVIATE their worry. Share with them that during BUSY times, it may take several WEEKS for the underwriter to finish. ECOA Part ____, Subpart ____ REQUIRES a lender to communicate a _____ disclosure whether the decision is APPROVAL, a COUNTEROFFER to, or ADVERSE ACTION at lease once within ____ days of receiving a completed application.

Answer 239

A. Part 1022, Subpart B
B. Notice of Action Taken
C. 30 days

Question 240

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
When evaluating a loan file, the primary CONCERN throughout the loan underwriting process is determining the _____ a loan represents. The underwriter attempts to answer several fundamental questions:
• Is there sufficient VALUE in the property pledged as COLLATERAL to assure RECOVERY of the loan amount in the event of DEFAULT?
• This is determined by an _____ of the real property.

Answer 240

A. degree of risk
B. appraisal

Question 241

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
• Is there a marketable property TITLE that provides the borrower and the lender a good and perfect LIEN POSITION ?
• This is determined by a _____ provided by a title insurance company or an ______.

Answer 241

A. title report
B. abstract of title

Question 242

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
• Are items regarding the real property considered such as _____ zones, environmental issues, and local municipal and regulatory issues that may affect the property?

Answer 242

A. flood

Question 243

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
• Does the borrower’s overall financial situation, which is comprised of credit, income, and assets, indicate a REASONABLE EXPECTATION of making the proposed monthly loan payments in a _____ manner?

Answer 243

A. timely

Question 244

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
A complete and accurate loan file, therefore, allows the underwriter to make an INFORMED decision.
According to Freddie Mac, “Underwriting mortgage loans is an art, not a science.” The underwriting process can be automated, where all information is fed into an ____, or performed manually, which is done by an individual who works for the lender.

Answer 244

A. Automated Underwriting System (AUS)

Question 245

The Mortgage Lending Process:
Underwriting:
Evaluating a Loan File:
Both processes have various qualifying standards applied to the loan information. Regardless of whether the underwriting process is manual or automated, the resulting FINAL DECISION will be:
1. ____ the loan as applied for which may be because the borrower or collateral was NOT a good risk or because the loan application file was INCOMPLETE.
2. ______ the loan on the terms APPLIED for.
3. Make the loan on ______ terms for example, a HIGHER interest rate, a DIFFERENT loan program, ADDITIONAL collateral, etc.

Answer 245

A. Reject
B. Make
C. Different

Question 246

The Mortgage Lending Process:
Underwriting:
Automated Underwriting Systems:
Automation is used in all facets of the lending process.
The purpose of automated underwriting is to REDUCE the _____ of examining a loan application and INCREASE the ______ of mortgage approvals. An AUS can provide CONSISTENT underwriting decisions using statistical computer models based on traditional underwriting factors and never considers factors such as race, ethnicity, age, or any other characteristic prohibited by law. And with large databases of statistics and information available, the _____ market has increased efforts to manage credit risk by improving loan criteria.

Answer 246

A. cost
B. speed
C. secondary

Question 247

The Mortgage Lending Process:
Underwriting:
Automated Underwriting Systems:
The AUS makes a recommendation to _____ a loan for delivery and allows the lender to process the clear to close or it refers it to an underwriter for further ______ review and analysis. Even with an automated approval, an underwriter still must VALIDATE the information entered into the AUS, along with the supporting documentation. While lenders may rely on AUSs for a preliminary decision, it generally comes down to a _____ underwriter to make the final decision.

Answer 247

A. accept
B. manual
C. human

Question 248

The Mortgage Lending Process:
Underwriting:
Automated Underwriting Systems:
Both Fannie Mae and Freddie Mac have PROPRIETARY AUSs and they CHARGE lenders for the privilege of using them.
Fannie Mae uses TWO automated underwriting systems:
_______ for BROKERS and ______ for LENDERS. Freddie Mac has a similar direct AUS called _____, which is used by BOTH brokers and lenders.

Answer 248

A. Desktop Originator® (DO®)
B. Desktop Underwriter® (DU®)
C. Loan Product Advisor

Question 249

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
With certain exceptions, TILA (Regulation Z) requires creditors to make a reasonable and good faith determination of a consumer’s ____ any residential mortgage loan and identifies the factors a creditor must consider in making a reasonable and good faith assessment of a consumer’s ATR. A _____ that violates ATR requirements may be subject to government enforcement and private actions.

Answer 249

A. ability to repay (ATR)
B. creditor

Question 250

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
In January 2013, the CFPB issued a final rule amending Regulation Z to implement TILA’s ATR requirements.
This final rule, and later amendments, is referred to as the _____ Rule. The rule defines features/ requirements for a loan to fall under a category of a ________ MORTGAGE, which is generally defined a mortgage that PROHIBITS or LIMITS _____ features that may harm consumers.

Answer 250

A. ATR/QM rule
B. qualified mortgage (QM)
C. risky

Question 251

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Loans that meet the QM requirements set forth by the ATR/QM rule are entitled to a presumption that the creditor making the loan SATISFIED the Truth In Lending Regulation ___ ATR requirements.

Answer 251

A. Regulation Z

Question 252

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
The line the CFPB draws with the ATR/QM rule is one that has long been recognized as the RULE OF THUMB that separates ______ loans from ______ loans.

Answer 252

A. Prime
B. Subprime

Question 253

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
• The ATR/QM rule provides that consumers may show a VIOLATION with regard to a qualified mortgage by showing that, at the time the loan was ORIGINATED, the consumer’s INCOME and DEBT obligations left INSUFFICIENT _____ income or _____ to meet living expenses.

Answer 253

A. violation
B. subprime
C. residual income
D. assets

Question 254

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
• If a ______ Loan satisfies the qualified mortgage criteria, it will be presumed that the creditor made a good faith and reasonable determination of the consumer’s “_____” and the lender will enjoy a “______” from liability.

Answer 254

A. prime loan
B. ability to repay
C. safe harbor

Question 255

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
• The rule EXCLUDES:
- _____ credit plans
- _____ plans
- _____ mortgages
- certain ____ loans

Answer 255

A. open-end credit
B. timeshare
C. reverse
D. temporary

Question 256

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
General QM Underwriting Requirements:
As set forth by the ATR/QM rule, to receive safe harbor from ____, a creditor must generally verify and consider EIGHT types of information when establishing the borrower’s ability to repay a mortgage loan:
1. Current _____ or assets
2. Current _____ status
3. Borrower’s credit history
4. Monthly _____ for the mortgage
5. Borrower’s monthly payments on other _____ mortgage loans
6. ______ payments for other mortgage-related expenses such as property taxes, hazard insurance, private mortgage insurance
7. Other _____ obligations of the borrower
8. Monthly debt _____, including the mortgage, compared to the borrower’s monthly income (debt-to-income ratio)

Answer 256

A. liability
B. income
C. employment
D. payment
E. simultaneous
F. Monthly
G. debts
H. payments

Question 257

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
General QM Underwriting Requirements:
Lenders must conclude that the borrower can _____ the loan.
For example, lenders may look at the consumer’s Debt-To-Income Ratio-total monthly debt divided by their total monthly gross income. Knowing how much money a consumer EARNS and is EXPECTED to earn and knowing how much they already OWE helps a lender determine how much more _____ a consumer can take on.
NOTE: RECORDS maintaining ATR MUST be RETAINED to demonstrate compliance by lenders for ____ years.

Answer 257

A. repay
B. Debt
C. three

Question 258

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
General QM Underwriting Requirements:
CAUTION: Lenders cannot base their evaluation of a consumer’s ability to repay on _____ rates.
Lenders must determine the consumer’s ability to repay both the principal and the interest over the _____ of the loan not just during an introductory period when the rate may be LOWER. Specifically, the loan must be underwritten based on a FULLY-amortizing schedule using the MAXIMUM rate permitted during the first ______ years.

Answer 258

A. teaser
B. life
C. five

Question 259

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
As set forth by the ATR/QM rule, for a loan to fall under the category of a General QM, it must adhere to the following:
• _____: ATR/QM loans limits points and fees, including those used to compensate loan originators, such as loan officers and brokers. A loan generally CANNOT be considered a qualified mortgage if the points and fees paid by the CONSUMER EXCEED ____% of the TOTAL loan amount, although certain bona fide discount points are EXCLUDED for prime loans.
See chart for 2022 trigger amounts.

Answer 259

A. No excess upfront points and fees
B. 3%

Question 260

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
Chart for 2022 Trigger Amounts:
• For a loan amount greater than or equal to $114,847?
= ____% of the total loan amount

• For a loan amount greater than or equal to $68,908 but less than $114,847?
= $______

• For loans greater than or equal to $22,969 but less than $69,908?
= ____% of the total loan amount

• For a loan amount greater than or equal to $14,356 but less than $22,969
= $______

• For loans less than $14.356
= ______ of the total loan amount

Answer 260

A. 3 percent
B. $3,445
C. 5 percent
D. $1,148
E. 8 percent

Question 261

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
As set forth by the ATR/QM rule, for a loan to fall under the category of a General QM, it must adhere to the following:
• _____: ATR/QM loans CANNOT have risky loan features, such as:
• Terms that ____ 30 years
• _____ payments
• ______ amortization payments where the principal amount ____.

Answer 261

A. No toxic loan features
B. exceed
C. Interest-only
D. Negative
E. increases

Question 262

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
As set forth by the ATR/QM rule, for a loan to fall under the category of a General QM, it must adhere to the following:
• _____: ATR/QM loans where the creditor does NOT verify ____ or _____ cannot be qualified mortgages.

Answer 262

A. No-doc loans are not eligible
B. income or assets

Question 263

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
As set forth by the ATR/QM rule, for a loan to fall under the category of a General QM, it must adhere to the following:
• _____: ATR/QM loans generally prohibit these penalties, except for certain fixed-rate, qualified loans.

Answer 263

A. Prepayment penalties prohibited

Question 264

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
Qualified Mortgage Features:
• _____: ATR/QM loans generally will be provided to people who have debt-to-income ratios less than or equal to _____%. This requirement helps ensure consumers are ONLY getting what they can likely afford. For a TEMPORARY______ period, loans that DO NOT have a 43% debt-to-income ratio but MEET government affordability or other standards - such as that they are _____ for purchase by Fannie Mae or Freddie Mac on the secondary market will be considered QUALIFIED mortgages.

Answer 264

A. Cap on how much income can go toward debt
B. 43%
C. transitional
D. eligible

Question 265

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
New Qualified Mortgage Rule:
On December 10, 2020, the CFPB amended Regulation Z to change ONE aspect of the QM loan definition by REPLACING the DTI RATIO LIMIT with an _____ LIMIT as follows:
The APR on the loan may NOT EXCEED the AVERAGE PRIME OFFER RATE (APOR) for a comparable transaction by:
First Lien APOR Limits:
• _____ or more percentage points for a FIRST LIEN transaction with loan amount of $114,847 or MORE.
• _____ or more percentage points for a FIRST LIEN transaction with loan amount of $68,908 or MORE but LESS than $114,847.
• _____ or more percentage points for a FIRST LIEN transaction with loan amount of LESS than $68,908.
• _____ or more percentage points for a FIRST LIEN transaction SECURED by a MANUFACTURED HOME with loan amount of LESS than $114,847.
Junior Liens APOR Limits:
• _____ or more percentage points for a JUNIOR LIEN transaction with a loan amount of $68,908 or MORE.
• _____ or more percentage points for a JUNIOR LIEN transaction with a loan amount of LESS than $68,908.

Answer 265

Remember: $68,908 / $ 114,847
NOTE: The LOWER the loan amount the HIGHER the APOR limit.
A. APR LIMIT
B. 2.25%
C. 3.50%
D. 6.50%
E. 6.50%
F. 3.50%
G. 6.50%

Question 266

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
New Qualified Mortgage Rule:
Applications received between March 1, 2021 and October 1, 2022 may use either the _____ RATIO or the _____ LIMIT STANDARD for a loan to be considered a QM.

Answer 266

A. DTI
B. APR

Question 267

The Mortgage Lending Process:
Underwriting:
The ATR/QM Rule:
New Qualified Mortgage Rule:
Additionally, with the new QM rule:
• A temporary GSE QM will be phased out as of October 1, 2022 and conforming loans MUST meet the same ____ LIMITATIONS as General QMs.
• There is a third category of QM, called the ____ QM.

Answer 267

A. APR
B. Seasoned

Question 268

The Mortgage Lending Process:
Summary: The common areas of work for a mortgage professional are MLO, loan processor, underwriter, and servicer.
• An _____ takes applications, pulls credit reports, orders appraisals, and assembles documents for mortgage loans.
• A _____ works on the file assembled by the originator, verifying the information in the file and coordinating other aspects of the loan and closing. • The ______ is responsible for reviewing the file and arriving at a credit decision for the lender or investor based on the credit risk associated with a particular loan. If there are conditions on the loan, they must be satisfied prior to closing.
A ______ oversees the collection of mortgage payments and pursues late payments on behalf of the mortgagee.

Answer 268

A. MLO
B. loan processor
C. underwriter
D. servicer

Question 269

The Mortgage Lending Process:
Summary:
• ________ is the total amount a lender or broker makes on a loan’s discount points, such as from loan fees.
• ________ are 1% of the loan amount, increase lender’s yield, and are paid for many reasons.
• _______ are used to buy down the interest rate.
• _______ is a tool MLOs can use to reduce a borrower’s settlement costs.

Answer 269

A. Lender’s return
B. Points
C. Discount points
D. Yield spread premium (or lender credits)

Question 270

The Mortgage Lending Process:
Summary: A borrower can get pre-qualified or pre-approved.
• _______ is when a mortgage broker or lender reviews a borrower’s history to determine if the potential borrower is likely to get approved for a loan and the approximate amount. Pre-qualification is not binding on the lender.
• _______ is when a lender uses an application to determine that a potential borrower can be financed for a certain amount for a specific property. A mortgage broker CANNOT give a borrower a pre-approval; ONLY a ____ can.

Answer 270

A. Pre-qualification
B. Pre-approval
C. lender

Question 271

The Mortgage Lending Process:
Summary: The loan process consists of four steps:
1. ______ with an MLO
2. ______ the application
3. ______ the application
4. ______ the borrower and the property.
Common fees include credit report, appraisal, title work, inspections, etc.
The loan application asks a number of personal and financial questions, along with information about the property the borrower wishes to purchase. The MLO must document that a borrower has the reasonable ______ the loan.

Answer 271

A. Consulting
B. Completing
C. Processing
D. Analyzing
E. ability to repay

Question 272

The Mortgage Lending Process:
Summary: Address and employment information must go back at least ___ to ___ years.
• Income should be stable and verifiable. Alimony/child support may be EXCLUDED as income if a borrower CHOOSES but if INCLUDED, it may be GROSSED up to _____. Those who are self-employed (at least 25% ownership) may need personal and company tax returns and financial statements.
• _____ and _____ must ALL be disclosed, including alimony and child support, if it’s an OBLIGATION.
• Liquid assets can be quickly and easily converted to cash. ______ is assets minus liabilities.

Answer 272

A. two to three years
B. grossed up 125%
C. Liabilities and Assets
D. Net worth

Question 273

The Mortgage Lending Process:
Summary: Bankruptcy is a court process that cancels debt and provides some relief for creditors.
• Chapter ___: bankruptcy is a liquidation proceeding where the debtor receives a discharge of all dischargeable debts.
• Chapter ____: bankruptcy is filed by an individual who wants to pay off debt over a period of up to five years.

Answer 273

A. Chapter 7
B. Chapter 13

Question 274

The Mortgage Lending Process:
Summary: The underwriting process may evaluate:
• _____: ability to pay
• _____: down payment or home value
• _____: good payment history
• _____: job stability and cash reserves
• _____: (health of job market, economy).
Some elements of the mortgage process may be automated to reduce time and costs for lenders. AUSs offer computerized analysis to recommend accepting the loan or refer it to a human underwriter for further consideration. Fannie Mae’s AUS is _______; Freddie Mac’s system is _______.

Answer 274

A. Capacity
B. Collateral
C. Credit
D. Character
E. Conditions
F. Desktop Underwriter®
G. Loan Product Advisor

Question 275

The Mortgage Lending Process:
Summary: Monthly ______ must show stability, quality, and durability. Bonuses, commission, part-time earnings, and overtime all count if shown to be a consistent part of the borrower’s income for the past few years. Lenders do not usually count temporary unemployment, welfare, and other income.
• _____ is a record of debt repayment.
• _____ is an objective means of evaluating credit. Lenders verify assets and may require financial statements.
• The three main credit bureaus produce similar credit scores, which range from about _____ to ______.
• A _____ letter can show part of the down payment/closing cost is a non-repayable gift.

Answer 275

A. Income
B. Credit history
C. Credit scoring
D. 300 to 850
E. Gift Letter

Question 276

The Mortgage Lending Process:
Summary: Conforming loans sold on the secondary market (e.g., Fannie Mae and Freddie Mac) require income ratios of 28% for housing expense and 36% for debt-to-income ratio.
• The _______ is the relationship of the borrower’s total monthly housing expense, or PITI (principal, interest, taxes, and insurance), to gross monthly income (stable) expressed as a percentage. PITI must also consider required homeowners association fees.
• Total debt-to-income ratio is the relationship of the borrower’s total monthly debt obligations (including housing and debts that will not be canceled and that have ten or more payments remaining) to gross monthly income expressed as a percentage. A borrower must qualify under ____ ratios. Fannie Mae, however, focuses on the ______.

Answer 276

A. 28%
B. 36%
C. Housing Expense Ratio - Front End Ratio
D. Total Debt-to-Income Ratio / DTI - Back-End Ratio
C. Both
D. Back-End Ratio

Question 277

The Mortgage Lending Process:
Summary: The ______ rule defines features/requirements for a loan to fall under a category of qualified mortgage (QM), which is generally defined as a mortgage that prohibits or limits the risky features that may harm consumers. Loans that meet the QM REQUIREMENTS set forth by the ATR/QM rule are entitled to a presumption that the creditor making the loan satisfied Regulation - ____: ability to repay requirements.

Answer 277

A. ATR/QM
B. Regulation Z

Question 278

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
1. Joe buys a house for $150,000, making a $30,000 down payment and paying three discount points to buy down the interest rate. What is the total cost of the discount points?
A. $1,500
B. $3,000
C. $3,600
D. $4,500

Answer 278

C. $3,600 - A point is 1% of the loan amount. Since Joe made a $30,000 down payment, the loan amount is $120,000. One point on this loan equals $1,200 ($120,000 x 0.01), so three points is $3,600.

Question 279

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
2. Mary receives a monthly child support payment from her ex-husband pursuant to a Judgment of Divorce.
Bob receives a monthly check because of a service-connected injury from his days in the military. John is a minister and receives money every month for living expenses. These payments are examples of
A. gross-up income.
B. nontaxable income.
C. public assistance payments.
D. unemployment compensation.

Answer 279

B. nontaxable income. - A regular source of a borrower’s income may be nontaxable-such as child support payments, Social Security benefits, a minister’s housing allowance, disability retirement payments, workers’ compensation benefits, certain types of public assistance payments, and food stamps.

Question 280

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
3. If a borrower is self-employed, they should provide:
A. an average monthly income amount earned over the previous two years.
B. employment verification from the last employer.
C. profit and loss statements for the previous six years.
D. tax returns for the previous two years.

Answer 280

D. tax returns for the previous two years. - For self-employment income to be used for qualifying, self-employed borrowers need to provide personal and entity (corporation, partnership, sole proprietorship) tax returns (all schedules) for a minimum of two years.

Question 281

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
4. Bob and Mary are providing a gift to their daughter, Amy, as down payment for the purchase of her new home. They provide a current bank statement for their account, a copy of their check to Amy, and a copy of the deposit slip into Amy’s account. Amy provides a current ledger from her checking account that verifies the deposit was made and the amount of the current balance. What key document is missing?
A. agreement signed by all parties stating when the gift is to be repaid
B. copy of the deposit receipt from the settlement agent
C. gift letter signed by the donor stating no repayment is expected
D. letter from Amy’s bank stating the gift funds have been deposited

Answer 281

C. gift letter signed by the donor stating no repayment is expected - If an applicant lacks the necessary funds to close a transaction, a gift of the required amount may be acceptable. The gift should be confirmed by means of a gift letter signed by the donor. The letter should clearly state that the money represents a gift and does not have to be repaid. In addition to the gift letter, lenders want to verify that the donor has the funds available to provide the gift by seeing a copy of the gift check, a recent bank statement from the donors showing they have the ability to give the gift and a copy of the deposit receipt showing funds have been deposited and are available for closing.

Question 282

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
5. To be classified as self-employment income, the borrower must own at least what percent of the business used for qualifying?
A. 5%
B. 10%
C. 25%
D. 50%

Answer 282

C. 25% - To be classified as self-employment income, the borrower must own at least 25% of the business.

Question 283

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
6. The majority of lenders throughout the country have incorporated into their conventional loan underwriting procedures the standards set by the major secondary market investors, specifically
A. ECOA.
B. Fannie Mae and Freddie Mac.
C. the FHA.
D. RESPA.

Answer 283

B. Fannie Mae and Freddie Mac. - Loans that are not backed by the full faith and credit of the United States follow the underwriting guidelines of Fannie Mae and Freddie Mac.

Question 284

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
7. When qualifying for a conventional loan, stable gross monthly income can include
A. alimony received (that a borrower chooses to reveal).
B. a bonus received for the first time last year.
C. erratic unemployment earnings.
D. income from other family members.

Answer 284

A. alimony received (that a borrower chooses to reveal). - Alimony received can be considered part of the borrower’s stable monthly qualifying income if it’s determined it is likely to be made on a consistent basis. Alimony should be expected to continue for a minimum of three years in order to be used in income calculations. It does not need to be listed as a source of income if a borrower does not want it considered.

Question 285

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
8. To combat income-related mortgage fraud, lenders require a review of the income provided to the IRS.
What document authorizes the lender to obtain income transcripts from the IRS?
A. 1003 and Verification of Income
B. 4506-T
C. Schedule 15
D. URAR

Answer 285

B. 4506-T - Underwriters generally require the lender to obtain a completed and signed Form
4506-T from a borrowers) at application. This form gives the lender permission to request electronic transcripts of federal tax returns from the IRS when documenting the borrower’s income to prevent mortgage fraud.

Question 286

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
9. Joe wants to get a loan to buy a house. When evaluating his credit obligations, which would LEAST LIKELY be considered as debt?
A. car loan payment
B. cell phone service payment
C. child support payment
D. credit card payment

Answer 286

B. cell phone service payment - Utilities and insurance premiums are not considered debts because they can, in theory, be cancelled. Lenders assume borrowers would turn off their phones or cable service before losing their houses.

Question 287

The Mortgage Lending Process:
Chapter 2:
Chapter Quiz:
10. Potential borrowers have stable monthly income of $3,000.
They have three monthly debts: $350 car payment
$50 personal loan payment
$50 credit card payment
What is the maximum monthly mortgage payment they would qualify for on a conforming loan?
A. $390
B. $630
C. $840
D. $1,080

Answer 287

B. $630
• The housing expense (front-end) ratio for a conventional conforming loan in 28%. $3,000 (income) × 0.28 = $840.
• The debt-to-income (back-end) ratio is 36%.
Looking at the debt-to-income ratio: $3,000 (income) x 0.36, = $1,080.
• From there, subtract the borrower’s monthly debts: $1,080 - ($350 +$50+ $50) = $630.
• The lender will consider
the lower number.