, Question 1
A loan estimate was issued on Monday. The closing disclosure is issued on the
following Wednesday. Which statement correctly describes the timing
requirement?
A. The CD must be received at least 3 business days before
consummation; the LE to CD timing is not regulated.
B. The CD must be received at least 3 business days before
consummation, and the LE must be issued within 3 business days of
application.
C. The CD must be received at least 7 business days before
consummation, and the LE must be issued within 3 business days of
application.
D. The CD must be received at least 3 business days before
consummation, and the LE must be issued within 7 business days of
application.
Correct Answer: B - The CD must be received at least 3 business
days before consummation, and the LE must be issued within 3
business days of application.
RATIONALE
TRID requires the LE to be issued within 3 business days of
application and the CD to be received at least 3 business days before
consummation. Option A ignores LE timing; C and D misstate the CD
or LE timing requirements.
Question 2
A self-employed borrower's tax returns show a 15% year-over-year decline in
net profit. The borrower claims the decline is due to one-time equipment
purchases. How should the processor handle this?
A. Use the lower current year net profit for qualifying income.
B. Add back the equipment purchases as a non-recurring expense to
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, determine qualifying income.
C. Average the two years' net profits to smooth the decline.
D. Exclude the decline because it is a one-time event.
Correct Answer: B - Add back the equipment purchases as a
non-recurring expense to determine qualifying income.
RATIONALE
Non-recurring capital expenditures can be added back to determine
stable income if documented. Using the lower profit (A) or averaging
(C) ignores the non-recurring nature; D improperly excludes the
decline without analysis.
Question 3
An appraisal report notes the subject property is in a flood zone but the flood
map is outdated. The lender's flood zone determination shows no special
hazard. What is the processor's most appropriate next step?
A. Rely on the lender's determination and proceed without flood
insurance.
B. Order a new flood zone determination from a third party.
C. Require flood insurance based on the appraisal and obtain a letter of
map amendment.
D. Request the appraiser revise the report to remove the flood zone
comment.
Correct Answer: C - Require flood insurance based on the
appraisal and obtain a letter of map amendment.
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, RATIONALE
When there is a discrepancy, the processor should follow the more
conservative approach and require flood insurance, then pursue a
LOMA if the property is removed from the SFHA. Relying solely on
the lender's determination (A) or altering the appraisal (D) is
improper; ordering a new determination (B) may not resolve the
conflict.
Question 4
A borrower has a 30-day late mortgage payment 18 months ago and a 60-day
late payment on a credit card 6 months ago. The lender's guidelines require no
60-day lates in the past 12 months. How should the processor classify this?
A. Acceptable because the mortgage late is over 12 months old.
B. Acceptable because the credit card late is not a mortgage late.
C. Unacceptable due to the 60-day late within 12 months.
D. Unacceptable due to both late payments.
Correct Answer: C - Unacceptable due to the 60-day late within
12 months.
RATIONALE
The guideline specifically prohibits 60-day lates in the past 12 months,
regardless of account type. The mortgage late is over 12 months old
(A), and the credit card late is still a 60-day late within 12 months (B).
Both lates together (D) is incorrect because only the 60-day late
violates the guideline.
Question 5
Which scenario most clearly indicates potential mortgage fraud?
A. A borrower's income documentation shows a 10% increase over the
previous year.
B. The purchase contract price is significantly above the appraised value.
C. The borrower's driver's license address differs from the property
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A loan estimate was issued on Monday. The closing disclosure is issued on the
following Wednesday. Which statement correctly describes the timing
requirement?
A. The CD must be received at least 3 business days before
consummation; the LE to CD timing is not regulated.
B. The CD must be received at least 3 business days before
consummation, and the LE must be issued within 3 business days of
application.
C. The CD must be received at least 7 business days before
consummation, and the LE must be issued within 3 business days of
application.
D. The CD must be received at least 3 business days before
consummation, and the LE must be issued within 7 business days of
application.
Correct Answer: B - The CD must be received at least 3 business
days before consummation, and the LE must be issued within 3
business days of application.
RATIONALE
TRID requires the LE to be issued within 3 business days of
application and the CD to be received at least 3 business days before
consummation. Option A ignores LE timing; C and D misstate the CD
or LE timing requirements.
Question 2
A self-employed borrower's tax returns show a 15% year-over-year decline in
net profit. The borrower claims the decline is due to one-time equipment
purchases. How should the processor handle this?
A. Use the lower current year net profit for qualifying income.
B. Add back the equipment purchases as a non-recurring expense to
Page 2
, determine qualifying income.
C. Average the two years' net profits to smooth the decline.
D. Exclude the decline because it is a one-time event.
Correct Answer: B - Add back the equipment purchases as a
non-recurring expense to determine qualifying income.
RATIONALE
Non-recurring capital expenditures can be added back to determine
stable income if documented. Using the lower profit (A) or averaging
(C) ignores the non-recurring nature; D improperly excludes the
decline without analysis.
Question 3
An appraisal report notes the subject property is in a flood zone but the flood
map is outdated. The lender's flood zone determination shows no special
hazard. What is the processor's most appropriate next step?
A. Rely on the lender's determination and proceed without flood
insurance.
B. Order a new flood zone determination from a third party.
C. Require flood insurance based on the appraisal and obtain a letter of
map amendment.
D. Request the appraiser revise the report to remove the flood zone
comment.
Correct Answer: C - Require flood insurance based on the
appraisal and obtain a letter of map amendment.
Page 3
, RATIONALE
When there is a discrepancy, the processor should follow the more
conservative approach and require flood insurance, then pursue a
LOMA if the property is removed from the SFHA. Relying solely on
the lender's determination (A) or altering the appraisal (D) is
improper; ordering a new determination (B) may not resolve the
conflict.
Question 4
A borrower has a 30-day late mortgage payment 18 months ago and a 60-day
late payment on a credit card 6 months ago. The lender's guidelines require no
60-day lates in the past 12 months. How should the processor classify this?
A. Acceptable because the mortgage late is over 12 months old.
B. Acceptable because the credit card late is not a mortgage late.
C. Unacceptable due to the 60-day late within 12 months.
D. Unacceptable due to both late payments.
Correct Answer: C - Unacceptable due to the 60-day late within
12 months.
RATIONALE
The guideline specifically prohibits 60-day lates in the past 12 months,
regardless of account type. The mortgage late is over 12 months old
(A), and the credit card late is still a 60-day late within 12 months (B).
Both lates together (D) is incorrect because only the 60-day late
violates the guideline.
Question 5
Which scenario most clearly indicates potential mortgage fraud?
A. A borrower's income documentation shows a 10% increase over the
previous year.
B. The purchase contract price is significantly above the appraised value.
C. The borrower's driver's license address differs from the property
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