Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: Mortgage Loan Origination Activities
OVERVIEW
Credit evaluation is central to the mortgage underwriting decision. An MLO must understand how credit scores are calculated, what appears on a credit report, how derogatory items affect qualifying, and the waiting periods that apply after major credit events. This knowledge is tested heavily on the NMLS exam.
- The Tri-Merge Credit Report
Most mortgage lenders pull a tri-merge credit report — combining data from all three major credit bureaus:
- Equifax
- Experian
- TransUnion
Each bureau generates a credit score. The middle score — the median of the three scores — is used for qualifying purposes. If there are two borrowers, the lower of the two middle scores is typically used.
- FICO Score Components
FICO scores range from 300 to 850. The five factors and their weights: