Chapter 6 — Self-Check Quiz

Twenty-five questions. Answer them before you look at the key. Questions 1–16 are multiple choice and written in the style of the SAFE MLO test where the material is exam-relevant; 17–25 are short answer and are graded by whether you could say the answer out loud to an underwriter without flinching.

Multiple choice

1. Which event ends the processing stage of a loan file?

A. The appraisal is received B. The file is submitted to underwriting C. The conditional approval is issued D. All borrower documents have been collected

2. Under the integrated disclosure rule, which of the following is not one of the six items that constitute an application?

A. The property address B. An estimate of the value of the property C. A signed authorization to obtain a credit report D. The mortgage loan amount sought

3. A borrower tells you over the phone that they earn \$96,000 a year and have "about \$40,000" saved. You run the numbers and email them a letter stating they can likely borrow \$300,000. This letter is:

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

4. Which party issues a clear to close?

A. The loan officer B. The processor C. The underwriter D. The closing agent

5. Which of these is a prior-to-funding condition?

A. A signed IRS Form 4506-C B. A gift letter with evidence of transfer C. A verbal verification of employment pulled in the closing week D. A title commitment free of a prior owner's lien

6. The Linden Street file spent 19 of its 51 days in the conditions stage and 5 days in underwriting. Which statement follows?

A. The underwriter was unusually slow B. Conditions consumed nearly four times as many days as the underwriting decision C. The file should not have been submitted until day 28 D. The processor was responsible for the entire 19-day condition stage

7. A loan originator has a consumer's name, income, Social Security number, property address, estimated value, and desired loan amount, but the consumer has signed nothing. Which is most accurate?

A. No application exists until the consumer signs the Form 1003 B. An application exists, and disclosure obligations have been triggered C. An application exists only if the originator enters it into the loan origination system D. An application exists only after the credit report is pulled

8. Funding is best described as:

A. The consumer signing the note and security instrument B. The lender's disbursement of loan proceeds C. The recording of the security instrument in the county land records D. The underwriter's release of the file to the closing department

9. Which of the following most accurately describes what an automated underwriting system recommendation establishes?

A. That the borrower is approved for the loan B. That the data entered meets published guidelines, subject to verification C. That the property will appraise at or above the contract price D. That the lender has committed to lend

10. A conditional approval is best understood as:

A. A soft decline that requires an appeal B. An approval subject to a specified list of items being delivered and found satisfactory C. A preliminary opinion with no underwriting authority behind it D. The same thing as a clear to close

11. Your referral partner asks how fast you close. Which measurement are they most likely using?

A. Submission to underwriting decision B. Application to clear to close C. Contract executed to closing D. Clear to close to funding

12. A shop reports an average of 21 days to close, counting from the submission milestone and excluding files that fell out. The most accurate criticism is that the number:

A. Is fabricated B. Uses a start line and a denominator that do not describe the consumer's experience C. Should be reported in business days rather than calendar days D. Cannot be compared across lenders under any circumstances

13. Which of these delays is entirely within the loan officer's control?

A. The appraiser's schedule B. The title examiner's search C. The day third-party orders are placed D. The underwriting queue

14. A milestone, as the term is used in a loan origination system, is:

A. A goal the loan officer sets for the month B. A defined, dated event that a file either has reached or has not C. Any communication with the borrower D. The point at which a loan becomes saleable

15. On day 33 of the Linden Street file, nine of eleven conditions were cleared and the file did not move for eleven days. The best explanation is:

A. The underwriter refused to review the file B. The two remaining conditions were prior-to-funding items and the closing was still two weeks out, so no one had a reason to advance the file C. The processor had not submitted the cleared conditions D. The rate lock had already expired

16. Which statement about the Closing Disclosure is most accurate?

A. It must be issued three business days before consummation B. It must be received by the consumer a defined number of business days before consummation C. It replaces the Loan Estimate and may be issued at the closing table D. Its timing requirement may be waived at the loan originator's discretion

Short answer

17. Name the seven stages of a purchase file and the event that ends each.

18. In one sentence, what is the difference between ownership of a file and possession of a file, and who holds each at day 25?

19. Give the two classification schemes for conditions and state the practical question each one answers.

20. Why is a 45-day contract not 45 days of loan processing? Use the Linden Street dates.

21. A borrower asks why the loan "is taking so long" on day 30. Give a two-sentence honest answer that does not blame underwriting.

22. Name the three questions a pipeline report answers and the two it does not.

23. State the chapter's central claim about slack in a pipeline, in one sentence, and give the day range on the Linden Street file that proves it.

24. The six-day overrun on the Linden Street file cost \$914.38 in a lock extension, against \$398.32 of prepaid interest the borrowers no longer owed at closing — a net of \$516.06. Answer two things in two sentences each: why the \$398.32 is not really a saving, and why the chapter still calls \$516.06 the cheap part of what those six days cost.

25. You are handed a live file at 8:00 a.m. and have thirty seconds to assess it. Name the three things you look for, in order.

Answer key — work the questions first **1. B.** A stage is defined by its exit event. Processing ends at submission to underwriting, not when documents are collected (collection is the activity, not the exit). (§6.1, §6.3) **2. C.** The six items are name, income, Social Security number, property address, estimate of the value of the property, and mortgage loan amount sought. A signed credit authorization is operational practice, not a component of the definition. (§6.2) **3. B.** Nothing was verified. A letter based on stated information is a pre-qualification no matter what the letterhead says. (§6.2) **4. C.** The underwriter signs off on the prior-to-document conditions and releases the file to the closing department. (§6.6) **5. C.** A verbal verification of employment must be current as of the note date and therefore cannot be satisfied early. A, B, and D are prior-to-document items. (§6.5) **6. B.** 19 ÷ 5 = 3.8 — nearly four times. Nothing in the figures supports A, C, or D. (§6.1, §6.7) **7. B.** The six items constitute an application whether or not anything is signed and whether or not the originator intended to take one. This is the trap in the question stem. (§6.2) **8. B.** Signing is closing (consummation); recording is a separate act by the closing agent; release to the closing department is clear to close. (§6.6) **9. B.** The system evaluates entered data against guidelines and specifies what must be verified. It has seen no documents and, on day 6, no property. (§6.4) **10. B.** And in ordinary practice it is what an approval *is* — some conditions cannot be satisfied until just before closing. (§6.4) **11. C.** Referral partners measure the interval their client lived through: accepted offer to keys. (§6.7) **12. B.** The number is not fabricated; it is measured from a start line the consumer never experienced, on a population that excludes the files that took longest. (§6.7) **13. C.** Elapsed third-party time is not controllable. The *order date* is entirely controllable and is the largest single lever in the file. (§6.3) **14. B.** (§6.9) **15. B.** Nothing was blocked and nobody was slow. That is exactly what makes it dangerous. (§6.5) **16. B.** The clock runs from receipt, not issuance, and the counting rules are technical — Chapter 22 works them. Waiver is narrowly limited to a bona fide personal financial emergency and is not discretionary. Verify current requirements with your compliance department. (§6.6) --- **17.** Prospect/lead (ends when an application is taken) · Application (ends when the file is turned over with third-party orders out) · Processing (ends at submission to underwriting) · Underwriting (ends at a decision) · Conditions (ends at clear to close) · Closing (ends when the borrowers sign) · Funding/recording (ends when the wire lands and documents record). **18.** Possession is whose queue the file is in right now; ownership is who is accountable for the file moving, and that is always the loan officer. At day 25 the file is in the underwriter's possession and the loan officer's ownership. **19.** By **source** — borrower, third party, lender — which answers *who do I call?* By **timing** — prior to document, prior to funding, prior to purchase — which answers *would calling today even help?* **20.** The buyers wrote the offer the night of day 0 naming a closing date 45 days out (day 45). The contract was not executed until day 4. From execution, the transaction had 41 days, and the application was not taken until day 5. **21.** Something like: "Right now we're waiting on two things nobody here controls — the appraisal came back on the 18th and the title work landed yesterday, and we submitted the same day. The underwriter's first look runs about five days, and then we'll have a list of items, most of which will be yours and small." Honest, specific, no villain. **22.** Answers: what is stuck, what is at a deadline, what is quiet. Does not answer: whether these files will actually close (that is pull-through), and *why* any given file is stuck. **23.** Slack in a pipeline is not spare time; it is exposure. Days 33 through 44 on the Linden Street file: a fully documented loan sitting still, during which the rate lock expired on day 42 (\$914.38 to extend) and the borrowers financed \$5,200 of furniture on day 41. Two separate failures, one window, and nobody made a mistake in it. **24.** *On the \$398.32:* it is not a saving but a timing shift — the borrowers prepaid six fewer days of interest because they owned the house six fewer days, so nothing was actually avoided, only deferred. Netting it against the extension understates the economic cost, which is nearer the full \$914.38. *On why \$516.06 is the cheap part:* set it beside a back-end ratio at 48.48%, a closing date gone, a seller asked for patience, a referral relationship with four prior closings behind it put at risk, and two first-time buyers who spent a weekend believing they had lost the house. None of those has a dollar figure and every one is larger. Delay bills you in dollars and charges you in exposure; the visible invoice is never the expensive one. **25.** (1) What stage is it in and how many days has it been there? (2) Who owes the next action, and by when? (3) What is the nearest hard date — lock expiration, contract closing date, or a document about to go stale?