Chapter 15 — Self-Check Quiz

Twenty-five questions. Multiple choice and short answer, written in the style of the SAFE MLO test where the material is exam-relevant. Answer key is in the collapsed block at the bottom — write your answers down before you open it.

Guideline figures used below are illustrative for the quiz. Loan limits, LTV maximums, DTI maximums, ratio benchmarks, and waiver criteria change; verify current values at the source.

1. Desktop Underwriter is owned and operated by:

  • A. The Federal Housing Administration
  • B. Fannie Mae
  • C. Freddie Mac
  • D. The Consumer Financial Protection Bureau

2. Loan Product Advisor's risk results are:

  • A. Approve and Refer
  • B. Accept and Caution
  • C. Accept and Refer
  • D. Eligible and Ineligible

3. Which statement about the TOTAL Scorecard is correct?

  • A. It is a standalone automated underwriting system operated by HUD
  • B. It replaces DU and LPA for all government loans
  • C. It is a scorecard run through an approved AUS, returning Accept or Refer
  • D. It applies to conventional loans delivered to Ginnie Mae

4. A conventional purchase returns Approve/Ineligible. This most likely means:

  • A. The borrower's credit does not support the loan
  • B. The file must be manually underwritten
  • C. The borrower is creditworthy but the loan breaks a product or program parameter
  • D. The lender has denied the application

5. Short answer. The recommendation has two halves. State what each half is about, in one phrase each.

6. An FHA case receives a Refer from the TOTAL Scorecard. The correct next step is:

  • A. Notify the borrower that FHA has denied the loan
  • B. Manually underwrite the file under HUD Handbook 4000.1
  • C. Resubmit the file to the other agency's automated system
  • D. Convert the file to a conventional loan

7. Which of the following is not something an automated underwriting system does?

  • A. Check the loan against published eligibility parameters
  • B. Generate a list of required documentation
  • C. Verify that a submitted paystub is genuine
  • D. Return a risk assessment of the borrower

8. Short answer. A loan officer submits an unchanged file to the same AUS three times in one afternoon. Explain what will happen and why.

9. The verification messages in a findings report are best described as:

  • A. The conditions on the loan approval
  • B. The documentation required to support the recommendation — a floor, not a ceiling
  • C. A complete list of everything the underwriter will require
  • D. Optional suggestions the lender may disregard

10. A borrower's income is \$8,400.00 a month. The proposed housing expense including mortgage insurance is \$2,268.00 and other monthly debts total \$742.00. The housing ratio and the total debt-to-income ratio are:

  • A. 27.00% and 35.83%
  • B. 26.31% and 34.17%
  • C. 27.00% and 8.83%
  • D. 35.83% and 27.00%

11. Short answer. Name the five figures on the underwriting-analysis page that a loan officer should reconcile against their own worksheet before reading the recommendation.

12. Fannie Mae's current name for what the industry still calls an appraisal waiver is:

  • A. Automated collateral evaluation
  • B. Value acceptance
  • C. Collateral Underwriter
  • D. Property data report

13. Which of the following is true of an appraisal waiver / value acceptance offer?

  • A. It is a statement that the property is worth the contract price
  • B. It substitutes for a home inspection
  • C. It appears in the findings for a specific casefile and may not survive a re-run
  • D. The lender is required to exercise it when offered

14. Short answer. A borrower says: "Great — if they waived the appraisal, we don't need an inspection." Correct them in two sentences.

15. On the Linden Street file, a \$611.00 monthly furniture payment appears on a pre-closing credit refresh. Total obligations were \$4,479.72 against \$10,500.00 of income. The new back-end ratio is:

  • A. 45.24%
  • B. 48.48%
  • C. 42.66%
  • D. 51.10%

16. Which of these is not a legitimate input to change before re-running an AUS?

  • A. The loan amount, after the borrower agrees to increase the down payment
  • B. The monthly debt schedule, after a debt is paid off and documented
  • C. The occupancy, after an Ineligible result on an investment property
  • D. The appraised value, after the appraisal is received

17. Short answer. Two things can change an AUS recommendation without anyone changing the application data. Name both.

18. A conventional 30-year fixed purchase on a \$385,000 primary residence with 2% down produces a loan amount of \$377,300 and an LTV of 98.00%. Assuming a 97% maximum LTV for the product, the likely recommendation and the correct response are:

  • A. Refer — manually underwrite the file
  • B. Approve/Ineligible — the borrower needs \$3,850 more down to reach 97%
  • C. Approve/Eligible — 98% is within tolerance
  • D. Out of Scope — the system cannot evaluate high-LTV purchases

19. An AUS recommendation of Approve/Eligible means the loan has been approved by:

  • A. Fannie Mae
  • B. The automated underwriting system
  • C. No one — a lender approves loans
  • D. The loan officer, subject to processing

20. Short answer. Your lender's overlay sets a 640 minimum representative score on a product whose agency guideline is 620. A file with a 628 returns Approve/Eligible. Explain who decided what.

21. Which data-entry error is most consequential because it changes LTV maximums, reserve requirements, pricing, and product eligibility all at once — and is a criminal matter if done deliberately?

  • A. A transposed income figure
  • B. An omitted revolving account
  • C. Occupancy
  • D. The lock period

22. Short answer. A findings report lists no message about a \$240 monthly credit union payment that the borrower mentioned at application. What does that tell you, and what does it not tell you?

23. The Harlow Street file shows ratios of 41.48% front and 51.00% back against an FHA manual benchmark of 31% / 43%. The loan is approvable because:

  • A. FHA does not enforce ratio limits
  • B. The TOTAL Scorecard returned an Accept, which is a different evaluation than the manual benchmark
  • C. The down-payment assistance second lien is excluded from the ratios
  • D. The borrower's 641 score exceeds the FHA minimum

24. Short answer. Write the accurate version of the sentence "Fannie Mae denied my borrower," and name the party whose name appears on an adverse action notice.

25. Which reading order does the chapter recommend for a findings report?

  • A. Recommendation, then verification messages, then loan data
  • B. Loan data and analysis, then verification messages, then eligibility, then the recommendation
  • C. Verification messages only; the rest is administrative
  • D. Front to back, in printed order
Answer key — open only after you have written your answers **1. B.** Fannie Mae. Freddie Mac's is Loan Product Advisor; FHA's TOTAL Scorecard belongs to HUD. **2. B.** Accept and Caution. DU says Approve and Refer. The exam likes to swap these. **3. C.** TOTAL is FHA's scorecard, run *through* an approved AUS such as DU or LPA, which supplies the data and pairs the scorecard's Accept-or-Refer with its own eligibility assessment. It is not standalone. **4. C.** *Approve* is about the borrower; *Ineligible* is about the loan. A creditworthy household on a loan that breaks a parameter — loan amount, LTV/CLTV, property type, occupancy, term, or a program limit. The fix is structural. **5.** The first half (Approve / Accept / Refer / Caution) is about **the borrower's creditworthiness** — whether the risk model endorses the file. The second half (Eligible / Ineligible) is about **the loan** — whether it meets the product and program parameters. **6. B.** A Refer routes the file to manual underwriting under HUD Handbook 4000.1. It is not a denial and no one has declined anything. **7. C.** An AUS never sees a document. It evaluates data a human entered plus a credit report. It cannot distinguish a genuine paystub from a fabricated one. **8.** All three submissions return the same recommendation. The system is deterministic: identical data on the same engine version produces an identical result. Re-running changes the answer only if the inputs change. **9. B.** They are the documentation required to support the recommendation — a floor. The lender's overlays and the underwriter's own review can add to them; nothing subtracts from them. The conditions on the approval (Chapter 19) are a separate, usually longer, list. **10. A.** Housing: \$2,268.00 ÷ \$8,400.00 = **27.00%**. Total obligations: \$2,268.00 + \$742.00 = \$3,010.00; \$3,010.00 ÷ \$8,400.00 = **35.83%**. **11.** Qualifying income · proposed monthly housing expense · total monthly obligations · total verified assets · reserves after closing. **12. B.** Value acceptance. Freddie Mac's version is automated collateral evaluation (ACE); Collateral Underwriter is a different Fannie Mae tool; a property data report is the collection used in the hybrid options. **13. C.** The offer is tied to the casefile and the submitted data and can disappear on a re-run. It is not an opinion that the price is right, it has nothing to do with a home inspection, and the lender elects whether to exercise it. **14.** "Those are two completely different things. An appraisal is an opinion of value for the lender; an inspection is a physical examination of the house for you — roof, systems, foundation — and nothing about the waiver tells you anything about the condition of the property." **15. B.** \$4,479.72 + \$611.00 = \$5,090.72; \$5,090.72 ÷ \$10,500.00 = **48.48%**. **16. C.** Occupancy is a fact, not a lever. Changing it to obtain a different result is occupancy misrepresentation — a crime, covered in Chapter 27. A, B, and D are all changes in the world that the data should be updated to reflect. **17.** (i) A **system version release** — the agencies periodically deploy new engine versions with published release notes, and a casefile resubmitted afterward is evaluated by the new version. (ii) A **new or refreshed credit report**, which brings in whatever has happened since the last pull. **18. B.** Approve/Ineligible — the borrower half is fine, the LTV breaks the product maximum. Three percent of \$385,000 is \$11,550.00 versus the \$7,700.00 they have; the gap is **\$3,850.00**. (FHA at 96.5% would be an alternative structural fix.) **19. C.** No one. An AUS returns a recommendation against published guidelines. The lender approves — subject to its underwriter's review of the documents and its own overlays. **20.** The **AUS** returned a recommendation against **Fannie Mae's guideline** (620). Your **lender** applies its own **overlay** (640) on top of that guideline, and the lender is the party making the loan. So the file is guideline-eligible and lender-ineligible, and the borrower needs a different lender or a different score. The findings never mention the overlay because the findings do not know your employer exists. **21. C.** Occupancy. It drives LTV maximums, reserve requirements, pricing, and in some cases product availability, and deliberate misstatement is occupancy fraud. **22.** The absence of a message tells you the **system did not see the debt** — it was not entered and it is not on the credit report. It tells you **nothing about whether the debt exists**. If it exists, the DTI on the report is understated and the recommendation was answered on facts that are not this file's. Enter it and re-run. **23. B.** An Accept from the TOTAL Scorecard is a different and more complete evaluation than a two-number manual benchmark. The 31/43 figures apply to manually underwritten FHA files (with higher permitted ratios where documented compensating factors exist). The DPA second is not excluded from the ratios, and a 641 score by itself does not override the manual benchmark. **24.** "The file came back Refer, here is why I think so, and here is what we do next." If the loan is ultimately declined, the **lender** denied it, and the lender's name appears on the adverse action notice — with the specific principal reasons required by ECOA and Regulation B, regardless of how complex the model behind the decision was. **25. B.** Read pages 2 and 3 first (they are the only pages you control), then the verification messages (the only page that creates work), then eligibility — reading for the *reason*, not the result — and the recommendation last, because it is a consequence of everything above it.