Mortgage Loan Origination Activities
Domain 3 covers the origination workflow: what must be collected, disclosed, verified, and documented, and in what order.
Application and disclosures
Regulation Z defines an application by six pieces of information: consumer name, income, Social Security number, property address, estimated value, and loan amount. The Loan Estimate follows within three business days, and the borrower's intent to proceed starts the clock. The Closing Disclosure must be received at least three business days before consummation.
Verification and ATR
Document income, assets, employment, and debts, including the eight ATR factors. Self-employed income uses tax returns plus a business narrative; rental income applies a vacancy factor; overtime and bonus income generally need a two-year history. Undisclosed-debt monitoring and a refreshed credit report before closing protect the file.
Compensation and steering
Loan originator compensation cannot be based on the loan's terms other than the amount, cannot be cut to match a competitor's price, and cannot be paid twice on the same transaction by both the borrower and the creditor. Steering a borrower into a higher-cost loan without a documented benefit creates fair-lending exposure.
Data collection and closing
HMDA requires government monitoring information (ethnicity, race, sex) at application, plus loan-level reporting. Changed circumstances justify a revised Loan Estimate; a borrower-requested change, such as switching from a fixed rate to an ARM, resets the baseline for the affected fees.
Example: Mid-process the borrower locks a lower rate and discount points change. A revised Loan Estimate issues the same day, resetting the points comparison. The Closing Disclosure, however, must still be received at least three business days before consummation - a rate lock never shortens the CD waiting period.
Traps: ordering the appraisal before the borrower receives the Loan Estimate; treating a rate-lock change as a 10 percent tolerance item; collecting monitoring information without providing the required notice; assuming a pre-approval letter is a commitment to lend.