Mortgage Loan Origination Activities
This domain tests the origination workflow from first contact to closing. Know the application process: taking a complete application (the six pieces of information under Reg B - name, income, SSN, property address, estimated value, loan amount), pulling credit, and issuing disclosures. Understand pre-qualification vs. pre-approval and how each is used.
Know documentation: income (pay stubs, W-2s, tax returns), assets (statements), and how underwriters calculate DTI (total monthly obligations ÷ gross monthly income). Understand automated underwriting findings and manual underwriting. Know the appraisal process, title search, and the role of the closing agent/settlement agent.
Understand loan officer compensation rules - no compensation based on loan terms, and no dual compensation from borrower and lender. Know the origination fee, discount points, and how they appear on the LE/CD.
Traps: confusing pre-qualification (no verification) with pre-approval (verified); miscounting DTI by using net instead of gross income; forgetting that a complete application triggers the LE; and assuming a loan officer can steer a borrower to a product for higher pay. Also watch for questions on advertising rules and record retention.
Rule of thumb: DTI uses gross monthly income and all recurring debt, including the proposed housing payment, credit cards (minimum payments), auto loans, and student loans.
Worked example: Borrower earns $6,000 gross/month. Proposed PITI is $1,800; auto $350; card minimum $50. Total debt = $2,200. DTI = $2,200 ÷ $6,000 = 36.7%.