Mortgage Loan Origination Activities
This domain tests the origination workflow from application through funding: disclosure timing, verification, underwriting, rate locks, closing, and compensation rules. Most items are timeline questions or "who may be paid how" questions.
Application and early disclosures
- An application exists for disclosure purposes when it contains six pieces: borrower name, Social Security number, monthly income, property address, estimated value, and loan amount.
- The Loan Estimate must be delivered or placed in the mail within three business days of application; the borrower's intent to proceed follows.
- A valid changed circumstance permits a revised Loan Estimate within three business days, and only for affected fees.
Verification and underwriting
- Typical file: pay stubs, W-2s, tax returns, bank statements, verification of employment, credit report, appraisal, title, and insurance.
- Automated underwriting findings drive documentation; appraisal independence rules prohibit pressure on appraisers; the borrower receives a copy of the appraisal.
- Higher-priced mortgage loans trigger escrow and appraisal requirements.
Closing and compensation
- The Closing Disclosure must be received at least three business days before consummation; mailing adds three days; a change that moves the APR beyond tolerance restarts the review period.
- Right of rescission: three business days for refinances and HELOCs on a principal residence, never for purchases or investment property.
- LO compensation rule: pay cannot be based on loan terms or conditions, no dual compensation, no splitting fees with unlicensed parties, and no steering to a higher-cost loan to increase pay.
Worked example
Application is taken Monday, January 6. The Loan Estimate goes out Thursday, January 9 - three business days. Consummation is set for Friday, January 17. The Closing Disclosure is delivered in person Tuesday, January 14, exactly three business days before consummation. If the APR changes at closing beyond tolerance, a corrected Closing Disclosure restarts the three-day period. For a refinance, rescission then adds three more days before disbursement.
Traps that cost marks
- Counting the application day as business day one.
- Treating "sent" as "received" without e-signature consent.
- Applying rescission to a purchase loan.
- Paying an originator a bonus tied to the interest rate, or paying a referral fee to a realtor.
- Ignoring that a revised Loan Estimate must be re-delivered, not just noted in the file.