Podcast
Questions and Answers
What must a refinance loan provide to the borrower?
What must a refinance loan provide to the borrower?
Which of the following is NOT a component of the loan origination process?
Which of the following is NOT a component of the loan origination process?
What distinguishes pre-qualification from pre-approval?
What distinguishes pre-qualification from pre-approval?
What is the purpose of entering data into an Automated Underwriting System?
What is the purpose of entering data into an Automated Underwriting System?
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When determining the suitability of a loan, which aspect of the borrower is evaluated?
When determining the suitability of a loan, which aspect of the borrower is evaluated?
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Which of the following accurately describes a legal requirement for lenders?
Which of the following accurately describes a legal requirement for lenders?
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What is one way a borrower can meaningfully improve their situation with a refinance?
What is one way a borrower can meaningfully improve their situation with a refinance?
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What role do Mortgage Loan Officers (MLOs) have during the loan process?
What role do Mortgage Loan Officers (MLOs) have during the loan process?
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What does a lender provide in a pre-approval?
What does a lender provide in a pre-approval?
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What is the primary responsibility of a Mortgage Loan Originator (MLO)?
What is the primary responsibility of a Mortgage Loan Originator (MLO)?
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In a mortgage loan origination process, which step follows the 'Application' stage?
In a mortgage loan origination process, which step follows the 'Application' stage?
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Which entity must be licensed to perform certain activities in mortgage loan origination?
Which entity must be licensed to perform certain activities in mortgage loan origination?
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What distinguishes a small mortgage lender from a large mortgage banking operation?
What distinguishes a small mortgage lender from a large mortgage banking operation?
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During which phase of the loan origination process does loan servicing occur?
During which phase of the loan origination process does loan servicing occur?
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What is an accurate description of the processing step in mortgage origination?
What is an accurate description of the processing step in mortgage origination?
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What role do loan originators typically play in the mortgage loan process?
What role do loan originators typically play in the mortgage loan process?
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Which component is essential to the Mortgage Loan Originator's (MLO) activities?
Which component is essential to the Mortgage Loan Originator's (MLO) activities?
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Study Notes
Mortgage Loan Origination Process
- Mortgage loan origination is the process of creating a mortgage loan. A Mortgage Loan Originator (MLO) is a licensed individual who takes applications and/or negotiates mortgage loan terms for compensation. Activities of an MLO are regulated by the SAFE Act.
- The complexity of the origination process varies by company size. Small operations might handle all aspects themselves or use contractors. Large operations employ specialized teams to handle the sequential steps of application, processing, underwriting, closing, and servicing.
Application Process
- MLOs are the primary contact point, providing loan options, assisting with applications, and reviewing loan programs.
- Key responsibilities include reviewing contracts, entering applicant data into Loan Origination System (LOS), potentially using Automated Underwriting Systems, explaining loan programs, evaluating loan suitability, determining repayment ability.
- Loan suitability involves financially matching the borrower with the best loan option, based on their situation, and ensuring that the borrower has a tangible net benefit, such as lower payments, interest rate, shorter term, or a more favorable loan product.
- Loan approval is not based solely on initial payments or property value.
- Legal requirements dictate that refinances should tangibly improve the borrower's financial situation.
- MLO responsibilities also include gathering information, evaluating applications, assisting with decisions, negotiating credit terms, and public communication.
- Loan inquiry begins before a full application. Consumers want program information, pricing and approval prospects.
Pre-Qualification and Pre-Approval
- Pre-qualification: A discussion about basic qualifying information, loan type, and programs. Based on disclosed income, assets, and credit, a preliminary estimate of a potential mortgage amount is given. It is not a commitment to lend. Disclosures are required if a credit decision is anticipated.
- Pre-approval: Requires a full application, credit report, income, and asset verification. With those elements present (excluding property info), lenders offer a written pre-approval, subject to property-related conditions. It is a credit commitment. Both processes require disclosures and HMDA reporting.
Loan Application Process and the Sales Agreement
- The mortgage lender is not a party to, nor bound by, the real estate sales agreement, but has fiduciary responsibility to fulfill borrower needs.
- The sales agreement begins when all parties agree (in writing) to the sales terms (property in contract). The lender is responsible for funding a loan that allows the buyer to comply with the contractual terms.
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Description
Test your knowledge on the mortgage loan origination process with this quiz. Explore key concepts like refinance loans, pre-qualification, and the role of Mortgage Loan Officers. Perfect for students of finance or aspiring mortgage professionals.
