Chapter 40 — Self-Check Quiz

26 questions. Multiple choice and short answer, written in the style of the SAFE MLO test where the material is exam-relevant — which, in this chapter, is mostly §40.6. The rest is business arithmetic and judgment, and it is tested here because it decides careers even though no examiner asks about it.

Answer key in the collapsed block at the bottom. Work the whole quiz first, and in particular work questions 21 through 26 before you look, because those are the book's closing argument and the answer is worth more to you if you got there yourself.

Where a question supplies a compensation rate, a conversion rate, or a salary, use it. None of those values is standard and none is published.

1. The production identity in §40.2 is:

A. units × basis points B. volume ÷ units × basis points C. units × average loan amount × basis points D. gross commissions − cost per file

2. An originator closes 4 loans totaling \$3,200,000 in a month. A second closes 12 loans totaling \$2,160,000. Which is correct?

A. The second originator produced more volume B. The first produced more volume and fewer units, and which one earned more depends on the compensation plan C. They produced the same volume D. Units are the only measure that matters to a lender

3. According to §40.1, what does the shape of a first year in origination actually require of the person starting it?

A. A larger marketing budget than most new originators plan for B. Five to seven months of living expenses in reserve, or a draw arrangement they understand C. A guaranteed salary for the first year D. A referral relationship with at least ten real estate agents before the start date

4. A draw against future commissions is best described as:

A. a salary paid during the ramp-up period B. a signing bonus C. a loan against commissions you have not yet earned D. a marketing allowance

5. Short answer. §40.1 gives four questions to ask a hiring manager. State any three, and for each one name what it is designed to detect.

6. A loan officer wants \$135,000 of income at 100 basis points on a \$375,000 average loan. The units required are:

A. 30 B. 36 C. 40 D. 45

7. Continuing question 6: at Chapter 7's illustrative 6.4% funnel conversion, the number of first conversations that unit count implies is approximately:

A. 230 B. 563 C. 2,304 D. 360

8. §40.3 identifies the correct first hire for a producing originator as:

A. a junior originator, because they add production B. a dedicated processor, because conditions are the bottleneck C. a loan partner or assistant, because it is the cheapest hire with the highest leverage and needs no lead surplus D. a marketing coordinator, because lead flow limits everything else

9. Short answer. State the three reasons §40.3 gives for why hiring a junior originator first usually fails.

10. A sales manager differs from a branch manager in that the sales manager:

A. is not required to hold a license B. develops originators without owning the profit and loss C. is paid only on personal production D. reports to the secondary marketing desk

11. A loan partner costs \$4,800 a month fully loaded. The originator earns \$3,000 per closed file. The additional closings per month required to break even on the hire are:

A. 1.2 B. 1.6 C. 2.0 D. 2.4

12. According to §40.4, the most important thing that changes when a solo producer becomes a team leader is that:

A. income becomes more predictable B. the job changes — days are spent on other people's files, development, and problems, and income becomes partly a function of management skill C. compliance obligations transfer to the employer D. average loan size rises

13. Regarding the SAFE MLO test and multi-state licensing:

A. Each state administers its own test, which must be passed separately B. The national test component with uniform state content is portable; fees, bonds, renewals, and any state-specific education still apply per state C. Passing in one state licenses the originator nationally D. Test portability applies only to federally registered originators

14. A borrower lives in State A. The property is in State B. The originator's desk is in State C. Which license is generally required?

A. State C only B. State A only C. Generally State B, where the property is — and possibly State A as well, because some states regulate based on where the borrower is when solicited D. All three, always

15. State MLO license renewal:

A. is biennial, with a window closing June 30 B. is annual, with a window closing December 31, and each additional state adds its own continuing education requirement C. happens automatically when continuing education is reported D. may be completed at any point in the following calendar year

16. Short answer. Give three good reasons to license in an additional state and one bad one.

17. In commercial mortgage origination, the key underwriting metric is:

A. debt-to-income B. loan-to-value C. debt service coverage ratio D. the representative credit score

18. According to §40.8, which of the following does not appear on the list of what protects an origination business through a rate cycle?

A. a purchase referral base built before it was needed B. a database of past clients C. the lowest rate in the market D. a cost structure that survives at half the volume

19. Short answer. §40.8 says a purchase referral base "cannot be built during" a contraction. State why, in two sentences.

20. §40.8 calls the most common terminal error in this business:

A. approving a loan that should have been declined B. a compliance violation C. scaling a cost structure on boom volume D. failing to license in enough states

21. The competitor's advertised 6.375% with no points was real — for which borrower?

A. any borrower who locked for 15 days B. a 740 representative score at 80% loan-to-value with no mortgage insurance C. a 706 representative score at 95% loan-to-value D. a borrower paying 1.625 points

22. Repriced honestly for the Linden Street file, 6.375% costs 1.625 points against the 0.500 point actually paid at 6.625%. The additional cash required at closing is:

A. \$914.38 B. \$1,828.75 C. \$4,114.69 D. \$5,943.44

23. The monthly saving at 6.375% is \$60.14. The break-even against the loan as closed is:

A. 30.4 months B. 60.3 months C. 65.7 months D. 68.4 months

24. Over five years, the rate saving on the competitor's quote totals:

A. \$3,608.40, which is \$506.29 short of what the rate cost to obtain B. \$4,114.69, exactly recovering the cost C. \$5,943.44, exceeding the cost D. \$721.68, the first year's saving only

25. Short answer. The extra cost of the "better" rate on this file is \$4,114.69, and the loan-level price adjustment for a 706 representative score at 95% loan-to-value is also \$4,114.69. Explain why those are the same number rather than a coincidence.

26. Short answer. Name the three loan-officer mistakes §40.10 identifies, state which one cost money and how much, and state which one would have been prevented by a single sentence.