Podcast
Questions and Answers
What is the primary role of a Mortgage Loan Originator (MLO)?
What is the primary role of a Mortgage Loan Originator (MLO)?
Which of the following is NOT a recognized step in the mortgage loan origination process?
Which of the following is NOT a recognized step in the mortgage loan origination process?
What is required for an individual to engage in mortgage loan origination activities on behalf of a mortgage lender?
What is required for an individual to engage in mortgage loan origination activities on behalf of a mortgage lender?
Which of the following activities is performed by a mortgage loan originator?
Which of the following activities is performed by a mortgage loan originator?
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In a small mortgage lender operation, who typically underwrites the loans?
In a small mortgage lender operation, who typically underwrites the loans?
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What characterizes the loan origination process in a large mortgage banking operation?
What characterizes the loan origination process in a large mortgage banking operation?
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Which option best describes the duties of loan originators during the application phase?
Which option best describes the duties of loan originators during the application phase?
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What does the term 'servicing' refer to in the mortgage loan origination process?
What does the term 'servicing' refer to in the mortgage loan origination process?
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What is one of the legal requirements for lenders when determining a borrower's ability to repay a loan?
What is one of the legal requirements for lenders when determining a borrower's ability to repay a loan?
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What does a refinance loan need to provide to the borrower?
What does a refinance loan need to provide to the borrower?
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What does the pre-qualification process NOT indicate?
What does the pre-qualification process NOT indicate?
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Which of the following must occur for a loan to be considered ready for approval?
Which of the following must occur for a loan to be considered ready for approval?
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What type of communication is encouraged to attract mortgage loan applications?
What type of communication is encouraged to attract mortgage loan applications?
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When does a Real Estate sale transaction begin?
When does a Real Estate sale transaction begin?
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Which of the following is true about pre-approval?
Which of the following is true about pre-approval?
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What should a borrower experience following a refinance loan for it to be considered beneficial?
What should a borrower experience following a refinance loan for it to be considered beneficial?
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What role may Mortgage Loan Originators (MLOs) play during the loan process?
What role may Mortgage Loan Originators (MLOs) play during the loan process?
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Which is NOT a way that the borrower’s financial situation may be improved through refinancing?
Which is NOT a way that the borrower’s financial situation may be improved through refinancing?
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Study Notes
Mortgage Loan Origination Process
- Mortgage loan origination is the creation of a mortgage loan, involving a licensed individual (Mortgage Loan Originator or MLO) if acting for a state-regulated entity.
- Origination methods vary by company size. Small operations may handle all aspects themselves or use contractors. Large operations may have a specialized team for each step.
Application Process
- Loan originators (MLOs, loan officers, brokers) act as the initial contact point for borrowers seeking loans.
- They provide information about loan options, help with applications, including reviewing contracts and entering data into Loan Origination Systems (LOS) and/or Automated Underwriting Systems.
- They describe loan programs and processes, and determine loan suitability by comparing borrower finances to loan terms.
- Legally, lenders must assess a borrower's ability to repay based on more than just initial payments or collateral value. Refinancing needs to result in a tangible benefit for the borrower.
- This can include lower monthly payments, interest rates or loan terms, or a more favorable loan type (e.g., from adjustable to fixed).
- MLOs may gather more information, evaluate applications, determine readiness for underwriting, assist with closing, and negotiate terms with borrowers and lenders.
- They also participate in marketing to attract applications.
Pre-Qualification and Pre-Approval
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Pre-qualification is an initial discussion about loan eligibility with the lender.
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It involves assessing income, assets, and credit to estimate a potential loan amount, but does not commit the lender to crediting the loan.
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Pre-approval occurs after a full application, with a credit report and verification of financial information.
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It commits the lender to loan approval, subject to property conditions.
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The borrower generally follows the same steps as a full loan application in a pre-approval process.
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Pre-approval requires disclosures and HMDA reporting.
Contracts and Lenders' Duties
- Real estate transactions start with a legally binding contract between buyer and seller ("In Contract").
- Mortgage lenders aren't parties to this contract, but have a duty to offer financing that will help the borrower fulfill the contract requirements.
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Description
Explore the steps involved in the mortgage loan origination process, including the roles of loan originators and the application methods. Learn how different company sizes impact the origination process and the legal requirements for assessing borrower suitability.
