Indiana MLO common mistakes
Indiana MLO · Understand the traps and how to avoid them.
Counting the three-business-day Loan Estimate deadline in calendar days and waiting until day three to mail it, then assuming the postmark satisfies delivery.
TRID uses a specific business-day definition for Loan Estimate timing and distinguishes delivery from receipt; mail time can push actual receipt past the required deadline.
What to do instead
Memorize the two TRID business-day definitions: for Loan Estimate delivery, a day the creditor's offices are open for substantially all business; for revised Loan Estimate and Closing Disclosure waiting periods, all calendar days except Sundays and federal holidays. Deliver or place the Loan Estimate in the mail no later than the third business day after application, and for revised Loan Estimates ensure receipt at least four business days before consummation.
Approving a marketing-services or desk-rental payment to a real estate agent who only sends referrals and performs no substantive work.
RESPA Section 8 permits payment for goods, facilities, or services actually performed, but not for referral of settlement service business; the label on the invoice does not control.
What to do instead
Test every payment: is there a real service, was it actually performed, and is the fee reasonably related to its value? If the agent's only contribution is sending clients, the payment is a prohibited kickback. Disclose affiliated business arrangements and pay only fair market value for documented services.
Sending an adverse action notice 45 days after denying a completed application and giving only a generic credit-score reason.
Regulation B generally requires notice within 30 days of a completed application, and the notice must include specific principal reasons or disclose the right to request them; incomplete or late reasons fail the rule.
What to do instead
Calendar the 30-day ECOA deadline from the completed application, use the specific reasons from the credit decision, and include the ECOA notice plus the credit-score disclosure when a score was used. Do not rely on a verbal denial or a vague statement such as credit history.
Telling a borrower that PMI automatically terminates at 80% LTV or that FHA mortgage insurance cancels at 78% of original value like conventional PMI.
Conventional PMI has borrower-requested cancellation at 80% of original value and automatic termination at 78% based on the amortization schedule; FHA MIP generally lasts for the life of the loan unless refinanced, and annual MIP rules differ.
What to do instead
Separate the products: conventional PMI cancellation and termination thresholds at 80% and 78% of original value with current payments; FHA MIP duration based on LTV, term, and endorsement date; VA funding fee versus PMI. Never apply the 78% conventional rule to FHA.
Describing the mortgage or deed of trust as the borrower's promise to repay and the note as the document that creates the lien.
The note is the evidence of debt and repayment promise; the security instrument creates the lien and gives the lender a remedy. Title and appraisal are separate concepts.
What to do instead
Use a three-part mental model: note equals promise to pay; security instrument equals lien and foreclosure remedy; title insurance equals ownership and encumbrance protection. Practice sorting closing documents into those categories.
Quoting a note rate to a borrower and calling it the APR without including origination fees, discount points, and other finance charges.
APR under TILA and Regulation Z includes finance charges and certain fees, so it is usually higher than the note rate; using the note rate as APR misstates the cost of credit and can violate disclosure rules.
What to do instead
Obtain the APR from the Loan Estimate or Closing Disclosure system, identify which fees are finance charges, and explain the difference between note rate as interest and APR as the cost of credit. Recalculate when fees or points change.
Taking a borrower's name, income, and Social Security number but not issuing a Loan Estimate because the borrower has not identified a property.
TRID defines an application by six pieces of information; once they are received, Loan Estimate timing starts even if the property is not yet under contract, subject to the special rule for a missing property address.
What to do instead
Memorize the six application items: consumer name, income, Social Security number, property address, estimated value, and loan amount. If the property address is unknown, collect the other five and issue the Loan Estimate within three business days of receiving the property address; do not wait for a purchase contract.
Steering a borrower into a higher-rate loan because it pays the MLO a higher yield-spread premium, then documenting the file as best product fit without comparing options.
MLO compensation rules prohibit compensation based on loan terms, and steering and fair-lending risk arise when the file lacks a documented comparison; a label does not cure the conflict.
What to do instead
Use a written options comparison showing rate, APR, points, fees, and monthly payment; document the borrower's choice; ensure compensation is not tied to rate or terms. Escalate any incentive that varies with loan terms.
Pulling a credit report or sharing a borrower's bank statements with a real estate agent to help the deal without a permissible purpose or authorization.
FCRA permissible-purpose rules and GLBA privacy rules limit access to consumer reports and nonpublic personal information; convenience is not consent.
What to do instead
Obtain written authorization where required, share only the minimum necessary with parties who need it, and keep credit reports in secured systems. Do not email full tax returns or bank statements unencrypted.
Applying only the federal HOEPA high-cost mortgage triggers and ignoring Indiana's Home Loan Practices Act when reviewing a loan for state-law compliance.
Indiana's Home Loan Practices Act has its own coverage and prohibitions for high-cost home loans, so a loan that is not HOEPA high-cost can still trigger state requirements; the exam tests state-specific triggers.
What to do instead
Study Indiana's high-cost home loan definitions, prohibited practices, and disclosure and remedy provisions separately from HOEPA. Use a two-column checklist: federal HOEPA triggers and Indiana triggers; if either applies, follow the stricter rule.