Mortgage Loan Origination Activities
The origination pipeline
Mortgage Loan Origination Activities is the workflow domain. Under Regulation X an "application" exists once a borrower submits six pieces of information in anticipation of a credit decision: name, income, Social Security number, property address, estimated value, and loan amount. That triggers the Loan Estimate. From there the file moves through verification, underwriting, conditional approval, closing, funding, and recording.
Verification and decisioning
- Credit requires a permissible purpose and borrower authorization; disputes must be resolved, not ignored.
- Income generally needs a two-year history; self-employed borrowers use tax returns with non-cash deductions added back, and a declining trend may force use of the lower year.
- Assets must be sourced and seasoned.
- Appraisal is delivered to the borrower under ECOA; pressure to inflate value must be reported.
- AUS findings such as DU or LP are guidance, not a guarantee, and manual underwriting applies when the file is ineligible.
- Rate locks carry expiration dates and extension costs.
Worked example
A self-employed borrower shows gross monthly income of $8,000 after add-backs, with proposed PITI of $2,400 and $600 in other monthly debts. Back-end DTI is $3,000 ÷ $8,000 = 37.5%. That is comfortably inside most investor limits, but note that the General QM definition is now price-based rather than a fixed 43% DTI cap, so the AUS and investor overlay actually control.
Traps that cost marks
- Counting bonus or overtime without a two-year history.
- Mixing gross income with net debt figures.
- Ignoring student loans - typically 1% of the balance or the documented payment.
- Treating a preapproval as a commitment to lend.
- Missing that a changed circumstance must be documented before a revised Loan Estimate is issued.