Mortgage Loan Origination Activities
This domain covers the life of the file, from first contact to post-closing. Questions are usually about sequence and documentation.
Take a complete application - the six pieces of information Regulation X recognizes (borrower name, income, SSN, property address, estimated value, loan amount) trigger the disclosure clock. Distinguish prequalification (a rough estimate, no verification) from preapproval (underwritten against documented income and assets). Collect and verify: pay stubs, W-2s, tax returns, bank statements, gift letters, and explanations for large deposits.
Order the appraisal and title work, and know that the borrower must receive a copy of the appraisal promptly and no later than three business days before consummation. On rate locks, document the lock date, expiration, and any extension fee; a lock is a contract term, so changes require a revised disclosure.
At closing, costs must fall within TRID tolerances: zero tolerance for lender-charged fees and transfer taxes, 10% cumulative tolerance for recording fees and some third-party services, unlimited tolerance for items the borrower shops for and selects off-list.
Compensation is a favorite topic. Loan originator compensation cannot be based on the terms of the transaction (other than the amount of credit extended) and cannot be paid by both the borrower and an interested party on the same loan. Steering a borrower into a higher-cost loan to increase compensation is prohibited.
Fraud detection matters: altered documents, unusual fonts, round numbers, income inconsistent with occupation, and occupancy claims that do not match the file are red flags that must be escalated, not resolved quietly.
Rule of thumb: if it is not in the file, it did not happen. Worked example: a borrower's bank statement shows a $15,000 deposit two weeks before closing; the correct step is to document the source and add a letter of explanation before submission - not to ignore it because the funds are seasoned.