Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: Mortgage Loan Origination Activities
OVERVIEW
Verifying a borrower's assets confirms they have sufficient funds for the down payment, closing costs, prepaid items, and any required post-closing reserves. Asset documentation requirements are specific and strictly enforced — lenders must verify both the existence and source of funds.
- Types of Acceptable Assets
Liquid assets:
- Checking and savings accounts
- Money market accounts
- Certificates of deposit (CDs)
Investment assets:
- Stocks, bonds, and mutual funds — typically discounted to account for potential sales commissions
- Retirement accounts (401k, IRA) — typically 60% to 70% of the vested balance may be counted to account for early withdrawal penalties and taxes
Other assets:
- Gift funds — with proper documentation
- Sales proceeds from existing home
- Business assets — with restrictions