Housing Counselor Certification (HUD) Practice Exam

Which action may a lender take to determine a borrower's character?

1. Check the credit score

2. Call an employer to verify employment

3. Assess income and assets

4. Review bank statements

The correct answer is: Call an employer to verify employment

A lender may call an employer to verify employment as a means of assessing a borrower's character. This action provides insight into the borrower's reliability and stability, which are important aspects of their character in the context of borrowing. When a lender speaks with an employer, they are looking for confirmation of the borrower's employment status, history, and potentially their behavior at work. This can indicate the borrower's ability to maintain a stable source of income, which is crucial for repaying loans. While checking the credit score, assessing income and assets, and reviewing bank statements are all important steps in evaluating a borrower's financial situation, they do not directly measure character. These actions provide valuable information about the borrower's financial history and current financial health but do not inherently reflect their personal attributes, reliability, or trustworthiness. Therefore, verifying employment through a call to an employer is a more character-specific assessment method utilized by lenders.