Mortgage Loan Origination Activities
Mortgage Loan Origination Activities
This domain follows the file from application to funding: disclosures, verification, underwriting, closing, and tolerance testing. The exam favors timing rules and changed-circumstance scenarios.
The origination sequence
- Take a complete application and issue the Loan Estimate within three business days.
- Provide the special information booklet and servicing disclosure as required.
- Collect only bona fide fees before the borrower indicates an intent to proceed; a credit report fee is the common exception.
- Process and verify income, assets, employment, title, appraisal, flood status, and insurance.
- Submit to AUS or underwriting, clear conditions, and issue the Closing Disclosure at least three business days before consummation.
- Fund and close only after required rescission periods and closing conditions are satisfied.
Tolerance categories
Zero tolerance: lender origination fees, points, and fees paid to affiliates. Ten-percent tolerance: recording fees and third-party services where the lender chooses the provider. No tolerance: prepaid interest, escrow deposits, and services the consumer shops for and selects from a provider not on the written list.
Worked example
An LO issues a Loan Estimate on Monday. On Thursday the borrower locks the rate, and discount points rise. A rate lock is a changed circumstance, so the lender may issue a revised Loan Estimate within three business days of the lock. The revised LE must reflect the new points; the lender cannot simply collect the higher amount at closing without a timely revised disclosure.
Traps
Do not issue a revised LE for a generic market change. Do not collect appraisal and title fees before intent to proceed. Do not ignore the three-business-day CD rule or the six-business-day rule for mailed CDs. Do not treat all fees as zero tolerance.