Chapter 6 — Exercises

Work these in order; they are graduated. Items marked † have worked solutions in the answers appendix, as do all odd-numbered items. Everything else is for your own judgment, your study group, or your manager.

No answers appear in this file. That is deliberate — a process you can only recognize is not a process you can run.

A. Recall and vocabulary

6.1 Name the seven stages of a purchase file in order, and state the exit event that ends each one. (The exit event, not the activity.)

6.2 † List the six items that constitute an application under the integrated disclosure rule. Then state, in one sentence each, two things that happen the moment all six exist.

6.3 Define, in your own words and without using the other term in the definition: (a) pre-qualification, (b) pre-approval. Then give the single word that distinguishes them.

6.4 What is a condition? Give the two classification schemes for conditions and say what question each scheme answers.

6.5 Distinguish clear to close, closing, and funding. For each, name the party who performs the action.

6.6 Define turn time using all three parts of the chapter's definition, then explain why the sentence "our turn time is fourteen days" is not yet a claim about anything.

6.7 What is a milestone, and why does the definition of a milestone determine the value of every turn-time number a company reports?

6.8 Fill in from memory, then check §6.1: on the Linden Street file, underwriting consumed _ days and conditions consumed _ days, out of ____ total.

B. Applied reasoning

6.9 A buyer's agent tells you the contract is a "45-day contract." Name three additional facts you need before that number means anything to your calendar, and say which one is most often overlooked.

6.10 † A colleague argues: "Ordering the appraisal on day 7 instead of day 12 only saves five days, and we can make five days up later." Rebut the argument in a paragraph, using the structure of the pipeline rather than an appeal to urgency.

6.11 A file is submitted to underwriting on day 20 and suspended on day 24 for missing asset documentation. It is re-submitted on day 26 and conditionally approved on day 30. What was the "underwriting turn time" on this file? Give at least two defensible answers and say which one you would report to an agent.

6.12 Explain why an Approve/Eligible from an automated underwriting system on day 6 does not entitle you to tell anyone the loan is approved. Name three specific facts that did not yet exist on day 6.

6.13 The chapter claims stage 5 (conditions) is the only stage with no bounded duration. Explain the structural reason, then name one change a lender could make to its process that would bound it.

6.14 Rank these four delays by how much damage they do to a purchase file, and defend the ranking: (a) the appraisal takes four days longer than expected; (b) the borrower takes four days to return a signed gift letter; (c) the underwriter's first look takes four days longer than the published turn time; (d) the file sits fully documented for four days awaiting a closing date.

6.15 §6.5 argues that "slack in a pipeline is not spare time, it is exposure." Give two examples of exposure other than the furniture purchase on the Linden Street file, and for each say which document in the file would go stale or change.

C. Qualify this borrower

Constructed teaching example. All figures illustrative.

A new file arrives on your desk:

6.16 † Compute the monthly taxes, monthly insurance, and monthly mortgage insurance, then the full PITI + MI payment. Show every step.

6.17 Compute the housing (front-end) ratio and the total debt (back-end) ratio to two decimals. State each one in a sentence a borrower would understand.

6.18 † On day 38 of this file, with a conditional approval already in hand, the borrower opens a retail credit line with a \$310.00 minimum monthly payment. Recompute the back-end ratio. Then answer the harder question: the new ratio is still under 43% — why might the approval be blown anyway? (Look at condition 11 in FIGURE 6.1.)

6.19 Using the stage structure in §6.1 and the figures above, sketch the earliest defensible closing date for this file if the application is taken on day 5 and your market's appraisal turn time is currently ten days. State every assumption you make.

D. Clear the condition

6.20 † You receive the conditional approval in FIGURE 6.1 at 4:40 p.m. on day 28. Write the work plan for the next ninety minutes: what you do, in what order, and why that order. Do not draft the borrower email yet — that is 6.29.

6.21 Sort the eleven conditions in FIGURE 6.1 into three lists by source. For each list, state your actual leverage in one sentence, and name the escalation path if it stalls.

6.22 † Two of the eleven conditions cannot be cleared before the closing week no matter what anyone does. Identify them, explain why, and describe what a loan officer should do about conditions that cannot be accelerated. ("Nothing" is a defensible answer only if you can say what makes it defensible.)

6.23 Condition 7 requires a title commitment free of a prior owner's mechanic's lien. You have no leverage over the title company. Write the three questions you would ask on your first call about it, in the order you would ask them, and say what each answer would change about your plan.

6.24 A condition reads: "Provide letter of explanation and source documentation for the \$4,900 deposit on Borrower 2's checking statement dated [date]." The borrower calls, irritated: "It's my commission check. Why is this anyone's business?" Draft your verbal response — under sixty seconds of speech — and name the two documents you will ask for before the call ends.

E. Read this document and find the problem

6.25 Re-read FIGURE 6.2, the pipeline report. Three files on it have a problem the FLAG column does not fully describe. Identify all three and say what you would do about each before 9:00 a.m.

6.26 A pipeline report from a different shop shows these columns: Loan #, Borrower, Loan Amount, Rate, Milestone, Closing Date. Name three columns you would add before you would be willing to manage a pipeline from it, and justify each in one sentence.

6.27 A report shows a file at milestone "Approved" with an age of 34 days and 0 days in stage. The loan officer reads this as good news. Give two readings of that row — one benign, one alarming — and say what single question distinguishes them.

6.28 † A conditional approval lists nine conditions, all marked prior-to-document, and none marked prior-to-funding. Assuming the lender is competent, what does this most likely tell you about when the approval was issued relative to the closing date? What would you verify before relying on that inference?

F. Write it

6.29 Write the day-5 email to the Linden Street borrowers that sets calendar expectations for the next six weeks. Requirements: under 250 words; name at least four dated or approximate milestones; include the "do not open credit" instruction in language a person will actually remember; and do not promise a closing date you cannot control.

6.30 † Write the day-36 status update to the buyer's agent described in §6.8's On the Phone callout — but as an email rather than a call. It must contain the four elements the callout names, and it must be under 120 words.

6.31 Write an internal memo to your branch manager, under 400 words, proposing one specific process change that would have prevented the day-41 furniture purchase on the Linden Street file. Include what it would cost, who would have to do it, and how you would know within ninety days whether it worked.

G. Judgment

6.32 On day 44 the credit refresh has found the new debt and the day-45 closing is dead. The buyer's agent calls before you have reached the borrowers. She asks directly: "Is there a problem?" The loan is not denied; it is in trouble, and you do not yet know the resolution. What do you tell her, and what do you not? Defend your answer against the two obvious objections — that you are withholding material information from a transaction participant, and that you are disclosing a borrower's private financial information to a third party.

6.33 Your branch's reported "average days to close" is 24. You know the count starts at the submission milestone, not at application, and that files which fell out are excluded. Your manager asks you to put "24-day closings" on your marketing materials. Work through what you owe: to the truth, to your employer, to your referral partners, and to your license. Then say what you would actually put on the flyer.

H. NMLS-style exam questions

Choose the single best answer. These are written in the style of the SAFE MLO test; the exam itself is not reproduced here.

6.34 † Under the integrated disclosure rule, an application exists when the loan originator has received which of the following?

A. A signed Uniform Residential Loan Application B. The consumer's name, income, Social Security number, property address, an estimate of the value of the property, and the mortgage loan amount sought C. The consumer's name, income, and a signed authorization to pull credit D. Any six items the loan originator deems necessary to evaluate the request

6.35 A loan originator reviews a consumer's credit report, paystubs, and bank statements and issues a letter stating the consumer qualifies for a loan up to a stated amount, subject to a property and to underwriting conditions. This letter is best described as:

A. A pre-qualification B. A pre-approval C. A commitment to lend D. A conditional approval

6.36 † A conditional approval includes an item that must be satisfied after the closing documents are drawn but before the lender disburses funds. This item is best described as:

A. Prior to document B. Prior to funding C. Prior to purchase D. A post-closing condition

6.37 Which statement about an automated underwriting system recommendation is most accurate?

A. It is an approval and may be communicated to the consumer as such B. It evaluates the data entered against published guidelines and specifies what must be verified C. It replaces the need for a human underwriter on conforming loans D. It cannot be run before the appraisal is received

6.38 † A consumer receives the Closing Disclosure and, before consummation, the annual percentage rate changes beyond the applicable tolerance. Which is most accurate?

A. A corrected Closing Disclosure is required, with no new waiting period B. A corrected Closing Disclosure is required and a new waiting period applies C. No corrected disclosure is required if the monthly payment did not change D. The consumer may waive the requirement in all circumstances

I. Loan File extensions

6.39 Build the calendar. Using the frozen Linden Street dates in the chapter, construct a one-page file calendar with these columns: Day · Event · Possession · Days elapsed in stage · Controllable (Y / N / influence only). Then add three columns FIGURE 6.2 does not have — lock expiration, contract closing date, and days since last borrower contact — and populate what you can. State explicitly what you cannot populate and why.

6.40 † The counterfactual. §6.5 argues that a clear to close on day 35 and a closing on day 38 would have prevented the crisis entirely. Write the two-paragraph argument against that counterfactual — the strongest honest case that the outcome was not preventable by scheduling. Then state which argument you find more persuasive, and why.