Chapter 9 — Exercises

Work these with a blank current Uniform Residential Loan Application open beside you. Items marked with a dagger (†) have worked solutions in the answers appendix.

Unless an item says otherwise, use the Linden Street figures: contract price \$385,000, loan \$365,750, total qualifying income \$10,500.00/month, monthly debts \$1,446.00, PITI plus mortgage insurance \$3,033.72, total obligations \$4,479.72.

Part A — Recall

9.1 † List the six items that constitute an application under the TILA-RESPA rule, in any order, and state what each one is (a fact about the consumer, the property, or the transaction).

9.2 State the deadline for delivering the Loan Estimate once an application has been received, and state precisely what the creditor must do to meet it.

9.3 The definition of "application" once contained a seventh item. What was it, what did it allow a creditor to do, and what happened to it?

9.4 Regulation Z contains two definitions of "business day." Name both, and state which one governs the three-business-day Loan Estimate deadline.

9.5 † Name the components of the current Uniform Residential Loan Application, and state which one the lender completes rather than the borrower.

9.6 Which section of the application collects each of the following: (a) a \$10,000 gift from a parent, (b) child support the borrower pays each month, (c) a rental property the borrower already owns, (d) whether the borrower will occupy the subject property, (e) the borrower's NMLS originator's identifier?

9.7 Define, in one sentence each: application date, intent to proceed, e-consent, borrower authorization.

Part B — The trigger: did this create an application?

For each of 9.8 through 9.15, state (a) which of the six items the creditor now holds, (b) whether an application exists, and (c) what, if anything, is now due and by when. Assume the creditor holds nothing before the scenario begins unless the item says otherwise.

9.8 A borrower calls and says: "I'm thinking about buying. What kind of rate could I get?" You tell her rates depend on the file and ask for nothing.

9.9 † A borrower emails his name, his Social Security number, and a pay stub showing \$7,200 a month gross. He says he is "looking in the \$400,000 range" but has not found a house.

9.10 The same borrower emails again four days later: "Found one — 118 Maple Court, listed at \$412,000. I'd want to put ten percent down."

9.11 A referral partner texts you the address, list price, and both buyers' names and incomes for clients you have never spoken to and whose Social Security numbers you do not have.

9.12 † A walk-in fills out a full paper 1003 in your lobby, completes every field, and then refuses to sign it.

9.13 Your company's written policy states that an application is not considered received until the purchase contract has been uploaded. A consumer has submitted all six items. Has the creditor received an application? Explain the answer to a colleague who wrote the policy.

9.14 A consumer submits all six items to a mortgage broker, who does not forward them to the wholesale lender for two days. When was the application received?

9.15 A borrower gives you five items and, when you ask for the estimated property value, says "I have no idea, whatever it appraises for." Does an application exist? What would you say next?

Part C — The form and the interview

9.16 † Rewrite each of these questions so a borrower is likely to give the answer the form actually wants: (a) "What do you make?" (b) "How long have you been at your job?" (c) "Do you own any other property?" (d) "Do you rent or own?" (e) "How much do you have in the bank?"

9.17 A borrower has been a physical therapist for nine years but started at her current clinic seven months ago. Which fields on the application capture each fact, and which one is more likely to rescue the file?

9.18 A borrower receives \$740 a month in child support. Write, verbatim, the two sentences you say to her before recording anything.

9.19 † Read the declarations excerpt in §9.4. For each of the following disclosures a borrower makes after the application is signed, name the declaration letter it belongs to and one document you would immediately request: (a) "My brother is going to lend me \$6,000 for closing costs." (b) "I co-signed my daughter's car loan two years ago." (c) "There's a lawsuit against the partnership I was in." (d) "We short-sold our old house — it was, what, five years ago?" (e) "The seller is my wife's cousin."

9.20 A borrower answers "yes" to the question about having had an ownership interest in another property in the last three years. Name three consequences that answer may have, and one program question it settles.

9.21 A borrower says "we'll probably live there most of the time" when asked about occupancy. Write your next two questions.

Part D — Documents and data integrity

9.22 † Build the day-5 document request list for a borrower who is a salaried high-school teacher with a summer job at a camp, married to a self-employed electrician who owns his own single-member business. Group it by borrower, include universal items, and state a deadline with a consequence.

9.23 A borrower sends you a one-page screenshot from their banking app showing a balance of \$31,402. Name three reasons this is not usable and write the one-sentence reply you send.

9.24 † Find the error. A 1003 for a two-borrower purchase shows the following. Identify every problem you can, and say which document you would compare each one against.

  Borrower 1  current address: 219 Ash Street, 14 months
              former address:  (blank)
              Housing: RENT $1,600
  Borrower 1  employer: Northside Medical, start date 02/2019
              Base $4,900.00   Overtime $1,100.00   Bonus $0.00
              (Most recent paystub: YTD gross $19,300 as of March 31)
  Borrower 2  employer: same as Borrower 1's employer, position "Office Manager"
              Employed by a party to this transaction?  (blank)
  Section 3   Real Estate Owned: (blank)
  Section 2c  Liabilities: 3 revolving totaling $95/month
              (Credit report shows 3 revolving totaling $95/month plus an
               installment loan, $362/month, 22 payments remaining, and a
               mortgage tradeline opened 2017, current, $1,240/month)
  Section 4a  Property: 219 Ash Street   Price $342,000   Occupancy: PRIMARY
  Section 5A  Will you occupy as primary residence?  YES

9.25 On the Linden Street file, compute the housing ratio and the back-end ratio if Borrower 2's auto loan (\$429.00, 19 payments remaining) had been omitted from the application. State the difference from the correct ratios in percentage points, and state the guideline concept that determines whether the omission was ever permissible.

9.26 A file is keyed with an employment start date of September of last year. The borrower's most recent paystub, dated April 15, shows year-to-date gross of \$24,600 and a semi-monthly gross of \$3,075. Is the start date consistent with the paystub? Show your reasoning.

9.27 † Write the twenty-minute day-5 reconciliation as a checklist you would actually use, naming for each line the 1003 field, the document you compare it to, and the specific failure you are looking for. Aim for at least ten lines.

9.28 Your borrower's 1003 says rent of \$1,900 a month for the last three years. The credit report shows a mortgage tradeline, current, opened four years ago, on the same borrower. Name three possible innocent explanations and state what you request for each.

Part E — Judgment, compliance, and NMLS-style

9.29 A loan officer reviews a marginal file and tells the borrower, "Honestly, with your credit you'd be wasting your time applying — try again in a year." Identify the rule this implicates, state why the loan officer's good intentions do not help, and describe what should have happened instead.

9.30 † An application has been open eighteen days. The borrower has not returned three requested items and has stopped answering calls. Your branch manager says to "just mark it withdrawn and clear it out of the pipeline." Respond in writing to your manager: what is wrong with that instruction, what the correct options are, and what you will do.

9.31 A borrower is denied. Write the opening ninety seconds of the phone call. Include the reason in plain language, whether it is changeable, and what you will do next.

9.32 NMLS-style. A consumer provides a creditor with her name, monthly income, Social Security number, the address of the property she wishes to purchase, and the amount she wishes to borrow. She does not know what the property is worth and provides no estimate. Under the TILA-RESPA rule, has the creditor received an application? A. Yes — five of six items is sufficient when the sixth is unknowable. B. Yes — the loan amount sought implies an estimate of value. C. No — an estimate of the value of the property is one of the six required items. D. No — an application requires a signed and dated 1003.

9.33 NMLS-style. Before a consumer has received the Loan Estimate and indicated an intent to proceed, a creditor may impose which of the following? A. An application fee B. An appraisal deposit C. A bona fide and reasonable fee to obtain the consumer's credit report D. A rate lock extension fee

9.34 NMLS-style. A creditor receives a complete application on a Thursday. Its offices are open to the public Monday through Friday and closed Saturday and Sunday, and no federal holiday falls in the period. Using the general definition of business day, what is the last day the creditor may deliver or place the Loan Estimate in the mail? A. Friday of the same week B. Saturday of the same week C. Monday of the following week D. Tuesday of the following week

9.35 NMLS-style, short answer. Explain why a loan officer's intention is irrelevant to whether an application has been received, and name one practice that reduces the chance of an accidental trigger.

Loan File extension

9.36 † Build the trigger log. For the Linden Street file, produce a one-page trigger log: each of the six items, the day it reached the creditor, the source it came from (borrower, agent, credit authorization, contract), the resulting application date, and the date the Loan Estimate was due and the date it went out. Then write the two-sentence file note that justifies why day 1 was not the application date — the note that goes to compliance before anyone asks for it.

9.37 Loan File extension. Write the complete day-5 document request message to the Linden Street borrowers as you would actually send it: one message, grouped by borrower, every item, a reason attached to at least half the items, a deadline, and one sentence on what happens if the deadline is met. Then re-read it and count the words. If it is over 400, cut it without losing an item.

9.38 Loan File extension. The Linden Street borrowers answered "no" to declaration D.2 (new credit before closing) on day 5, truthfully. On day 41 they will finance \$5,200 of furniture. Write the sixty-second script you would deliver on day 5 that gives this file its best chance of not having that problem. Then state honestly what your script cannot control.