Mortgage Loan Originator (MLO) Licensing Practice Test

In what situation does a broker utilize table funding?

1. When they have a direct relationship with borrowers

2. When they use their own funds for loans

3. When they possess correspondent lender status

4. When not working with financial institutions

The correct answer is: When they possess correspondent lender status

Table funding is a process that allows mortgage brokers to originate loans and have them funded by a third-party lender at the closing table. This scenario commonly arises when a broker has correspondent lender status. With this status, brokers can facilitate loan transactions without needing to transfer to a retail lending setup. By utilizing table funding, brokers can close loans in their own name and then immediately sell those loans to a lender, typically at or immediately after the closing. This allows brokers to provide more flexible services to their clients and often enables quicker transactions. In contrast, having a direct relationship with borrowers does not inherently necessitate table funding, and using their own funds would imply a different funding model altogether, likely removing the broker from the table funding process. If brokers are not working with financial institutions, that could indicate a lack of a structured funding environment where table funding would be inappropriate or unavailable. Thus, the reliance on correspondent lender status is key to understanding when table funding is effectively utilized.