Chapter 36 — Exercises
Technology: LOS Systems, CRM, Pricing Engines, AI, and the Digital Mortgage
Items marked † have worked solutions in the answers appendix. Everything else is for your own work, your study group, or your manager's red pen. There are no answers in this file.
Unless an item says otherwise, use the Linden Street facts: \$385,000 purchase, conventional 30-year fixed, 5% down, loan \$365,750, LTV 95.00%, representative score 706, rate 6.625% with 0.500 discount point, P&I \$2,341.94**, PITI + MI **\$3,033.72, income \$10,500.00/month, other debts \$1,446.00/month**, back-end **42.66%**, cash to close **\$25,376.34, 30-day lock taken day 12 expiring day 42, conditional approval day 28 with 11 conditions, nine prior-to-doc conditions cleared between day 29 and day 33, credit refresh day 44, closing day 51.
A. Recall and definitions
1. Name the seven categories of system in a loan officer's stack and state, in one clause each, what job that category does.
2. Which system is authoritative for the loan amount, and why does the answer matter to an examiner three years after closing?
3. State the difference between an electronic signature and a transferable record, and say which one a promissory note requires.
4. † Define control as the term is used for an eNote, and explain in two sentences why possession does not work as the governing concept for an electronic note.
5. What are the four facts a pricing engine needs about a file before it can return a rate?
6. Distinguish document management from a document repository as those phrases are used in §36.2. What does retention add?
7. In one sentence each, define: point-of-sale system, customer relationship management database, model risk, explainability, remote online notarization.
8. Which two federal statutes give an electronic signature legal effect, and what is the relationship between them?
B. Applied reasoning
9. † Figure 36.1 shows loan L-2214 on day 37 with a green status indicator, no overdue task, and nine of eleven conditions cleared. Every fact on the screen is accurate. Write a paragraph explaining to a new loan officer why "green" on that screen does not mean "on track," using the distinction between an event and the absence of one.
10. The chapter argues that failures happen at the seams between systems rather than inside them. Give three examples from your own experience or from the chapter, and for each, name which two systems held different versions of the same fact.
11. A borrower completes the online application and the portal shows 100%. The loan officer's needs list shows six outstanding items. Both displays are accurate. Explain what each one is measuring.
12. §36.5 says the pricing engine "answered the question it was asked, correctly, and the question was wrong." State the question that was asked on day 12, state the question that should have been asked, and identify who was positioned to ask it.
13. † §36.6 observes that a 90-day asset lookback contains a quarterly event exactly once, which is why the \$4,900 commission deposit was flagged as an outlier. Generalize this into a rule about detection thresholds and observation windows, then name one other place in mortgage origination where the same problem appears.
14. Explain why a model that has never been given a borrower's race can nevertheless produce outcomes that track race. Use the word "proxy" and give two concrete examples of a proxy variable.
15. The chapter says the HOLC residential security maps "appeared to be validated by outcomes they had themselves produced." Describe the feedback loop in four steps, in order.
16. Why is explainability described in §36.9 as a legal requirement rather than a technical preference? Reconstruct the four-step chain from decision to disclosure.
C. "Which of these decisions can be automated, and which cannot?"
For each item 17 through 26, state: (a) can this decision be fully automated today, (b) if not, what specifically prevents it — a legal obligation, a data limitation, or a judgment requirement — and (c) what the responsible partial automation looks like. Be precise about why; "a human should check" is not an answer.
17. Classifying a 40-page borrower upload into document types and filing each against the right condition.
18. Reading the year-to-date gross off a paystub and populating an income field.
19. † Deciding whether Borrower 2's commission income qualifies at the 24-month average (\$1,800.00/month) or the most recent year (\$1,950.00/month).
20. Flagging a bank statement whose column totals do not foot.
21. † Issuing a denial to an applicant whose application was scored by a proprietary model.
22. Ordering an appraisal from inside the LOS when the file reaches the processing milestone.
23. Deciding whether a large deposit has been adequately sourced.
24. Sending an automated status update to a borrower when a milestone changes.
25. Deciding which five files in a thirty-file pipeline the loan officer should work on first.
26. Determining that a lien release recorded against the wrong lot number does not release the lien.
27. Now rank items 17–26 from "most confidently automatable" to "least." Write one sentence defending your bottom three.
D. Qualify the borrower / run the numbers
28. † Using the day-12 pricing grid in §36.5:
- (a) Confirm that the cost of the 0.500 discount point is \$1,828.75.
- (b) Compute the monthly saving of the locked rate against par (6.750%, P&I \$2,372.25).
- (c) Compute the break-even in months, and convert to years to one decimal.
- (d) Compute the cost of the day-42 15-day extension at 0.250 point.
- (e) Express (d) as a fraction of (a) and state what that comparison tells a loan officer about the cost of an undersized lock.
29. The file's cash to close is \$25,376.34. Suppose a criminal successfully misdirects it three days before closing.
- (a) State what the borrowers still owe at closing.
- (b) State how many months of PITI + MI (\$3,033.72) the loss represents, to two decimals.
- (c) The borrowers' reserves after closing were to be \$12,623.66. Explain in one sentence why the loss is not "covered" by reserves.
30. Build the "days since last activity" column for the Linden Street file from the calendar in the Loan File checkpoint. Identify the largest gap other than the eleven-day window, and state the ratio of the dead window to that gap, to one decimal.
31. Between day 33 and day 44 there are eleven calendar days. Using day 0 = Wednesday, compute how many of the intervening days (34 through 43) were business days. Show which two were not.
E. Structure, diagnose, and clear
32. † Read this screen and find the problem. A loan officer's pipeline shows:
LOAN PROPERTY MILESTONE STATUS LOCK EXP EST. CLOSE NEXT DUE
L-3308 CYPRESS CT Cond. Approval ● GREEN day 25 day 31 — none —
L-2214 4412 LINDEN ST Cond. Approval ● GREEN day 42 day 45 — none —
L-4102 HARLOW ST Submitted ● GREEN day 30 day 28 — none —
Two of these three rows contain a problem that no status indicator will ever show. Identify both, state the arithmetic that reveals each one, and write the two phone calls you make first.
33. A condition on your file reads: "Letter of explanation and source documentation for the \$4,900 deposit." The borrower has uploaded a screenshot of their online banking showing the deposit. Write the message you send back — specific about what is missing, why the underwriter needs it, and what document will end this.
34. Your LOS shows a condition open. Your document folder contains the document that satisfies it, uploaded eight days ago. Write the four-step reconciliation routine you will run on every file in your pipeline twice a week to prevent this, and estimate the total weekly time cost for a thirty-file pipeline.
35. † Write the protocol. Draft a one-page wire fraud prevention protocol for a five-person branch. It must cover, at minimum: (a) the absolute rule about email and wire instructions; (b) the verification method, including how the phone number is obtained; (c) what is said to the borrower at application and what is said before closing, in the borrower's language rather than the industry's; (d) the three red flags the borrower is taught; (e) what everyone in the branch does in the first hour after a misdirected wire is discovered, in order; (f) what must never be deleted. Keep it to one page. A protocol nobody can read on a Tuesday is not a protocol.
36. Your borrower emails you asking for the title company's wire instructions "so I can get it done tonight." Write your reply. It should take under sixty seconds to read and should not make the borrower feel foolish for asking.
F. Write it
37. Write a 150-word explanation, for a real estate partner who is not in lending, of why a borrower can complete an online application at 100% and still receive six document requests. The partner has complained that your process "isn't really digital."
38. † Write the internal escalation memo described in §36.9's "what a loan officer actually does." The facts: a pricing engine has returned an eligibility denial for a conventional loan on a single-family detached primary residence at 95% LTV with a 706 representative score — a structure you believe is plainly eligible. The memo goes to whoever owns the engine. It should state the file, the inputs, the output, what you believe the correct answer is and why, what you checked before writing, and what you need.
39. Write the paragraph you would add to your employer's borrower welcome packet warning about wire fraud. Constraints: eighth-grade reading level, under 120 words, no jargon, and it must survive being read once, weeks before it matters.
40. A borrower has been declined. The adverse action notice they received lists reasons that do not match what you know killed the file. Write the note you send to your manager and compliance. Do not speculate about causes you cannot support; state what you observe and what you are asking for.
G. Judgment and ethics
41. † You are leaving your employer in three weeks for a competitor. Your CRM contains 340 past clients and 61 referral partners. Your LOS contains their loan files. Working from §36.4's three layers, write out: (a) what you will take, (b) what you will not take, (c) the two documents you will read before you do anything, and (d) the one professional you will consult. Then write the sentence you will say to a former client who calls you at the new company having found you themselves.
42. A vendor demonstrates a model that, they say, predicts which of your leads will close. They will not describe the inputs, citing trade secrets. Your branch manager wants to use it to decide which leads get called back. Write your objection in under 100 words, and name the specific risk.
43. A colleague pastes a borrower's complete 1003 into a general-purpose online tool to get help drafting a letter of explanation. They tell you the tool is "private" and no harm was done. State what actually happened, who must be told, and why "no harm was done" is not the standard.
44. Your LOS lets you write free-text notes on a file. A processor has written: "Borrower seems distracted — mentioned they're expecting a baby in the spring, may not be focused on this." State every problem with that note, and write what should have been written instead if anything needed to be recorded at all.
45. A title company you have worked with for nine years emails updated wire instructions two days before closing, from the address you have always used, signed by the officer you always deal with. The borrower is asking whether to proceed. What do you do, and why does the length of the relationship not change the answer?
H. NMLS-style exam items
46. Under the federal E-SIGN Act, where another law requires that information be provided to a consumer in writing, electronic delivery is permitted if the consumer:
- A. is provided a paper copy on request
- B. affirmatively consents in a manner that reasonably demonstrates the ability to access the electronic records
- C. has an email address on file
- D. signs the application electronically
47. Rights in an electronic promissory note held as a transferable record are transferred by:
- A. physical delivery of the file
- B. endorsement and delivery
- C. a change in control of the authoritative copy
- D. recording in the county land records
48. † A creditor denies an application. Under the Equal Credit Opportunity Act and Regulation B, the applicant must generally receive:
- A. a statement of the specific principal reasons for the denial, or notice of the right to obtain them
- B. the creditor's underwriting guidelines
- C. a copy of the model used to evaluate the application
- D. no notice, if a consumer report was not used
49. Which of the following best describes the requirement when a credit decision is based on a complex algorithm the creditor cannot readily interpret?
- A. the creditor is excused from stating specific reasons
- B. the creditor may substitute a general statement of creditworthiness
- C. the specific reason requirement still applies; complexity is not an exception
- D. the vendor becomes responsible for the notice
50. Nonpublic personal information collected from a mortgage applicant is protected under:
- A. the Fair Housing Act
- B. the Gramm-Leach-Bliley Act
- C. the Real Estate Settlement Procedures Act
- D. the Home Mortgage Disclosure Act
51. Remote online notarization is governed principally by:
- A. federal law, uniformly across the states
- B. the Uniform Residential Loan Application
- C. state law, which varies as to authorization, identity proofing, and recording retention
- D. the lender's investor guidelines only
52. A loan officer tells a declined applicant, "the automated system turned you down." The most accurate criticism of that statement is that:
- A. automated systems do not evaluate applications
- B. the creditor, not the system, took the adverse action, and the applicant is entitled to the specific principal reasons
- C. the statement violates the Fair Credit Reporting Act's risk-based pricing rule
- D. the statement is accurate but impolite
I. Loan File extension
53. † Rebuild the Loan File checkpoint's 51-day table and add a fifth column: "who should have acted, and on what day." Complete it for days 34 through 43. For each entry, name the role, the specific action, and the system in which it would have been recorded. Then answer, in three sentences: which single action, taken on which single day, would have prevented both the lock expiration and the missed closing date?
54. Design the Monday-morning report described in §36.11. Specify: the fields it contains, the sort order, the threshold at which a row demands action, and what you do with the top five rows. Then explain why this report is not, and should not be, an automated alert that emails you.
55. The credit refresh on day 44 caught a debt incurred on day 41. Write a short analysis — no more than 250 words — arguing both sides of this question: would continuous undisclosed-debt monitoring have saved this file? Address the reporting lag from the furnisher, the lock expiration on day 42, and what the day-1 conversation and the day-28 prior-to-funding condition each contributed. End with your own conclusion and the reason for it.