☑️ Chapter 11: Ethics in Mortgage Lending

Question 1

Ethical and Legal Considerations:
Ethics in the mortgage industry may seem like a complex issue, but it really boils down to a few simple points:
• Serve the mortgage lending needs of the public in an _____ manner.
• Treat everyone EQUALLY.
• Be HONEST.
• Give FULL disclosure about all terms and conditions of the mortgage loan.
• Don’t use your knowledge to take ______ of people.
• Keep good DOCUMENTATION.
• Adhere to a CODE of ethics from a professional organization.

Answer 1

A. ethical
B. advantage

Question 2

Ethical and Legal Considerations:
While there are obviously many laws in place to protect consumers, potential customers generally rely on the honesty and integrity of those mortgage professionals with whom they deal.
The Federal Trade Commission has the authority to act in the interest of all consumers to prevent deceptive and unfair acts or practices. Title ___ Section ____ of the ____ Act prohibits unfair or deceptive practices of any kind, which includes advertising in any medium. Therefore, advertising must be designed to tell the truth and NOT mislead consumers.
A claim can be MISLEADING if either it implies something that is not true or if relevant information is left out.
For example, an advertisement for a loan that promotes “$0 Down” may be misleading if SIGNIFICANT charges that are due at closing are NOT disclosed in the advertisement.

Answer 2

A. Title 15
B. Section 5
C. Federal Trade Commission Act

Question 3

Ethical and Legal Considerations: The most prominent example of such ethical guidelines is presented by the ______, which is the leading national trade association for the mortgage industry. The following ideals are found in NAMB’s code of ethics:
• Honesty and ________: NAMB members shall conduct business in a manner reflecting honesty, honor, and integrity.
• Personal ________: NAMB members shall conduct their business activities in a professional manner. Members shall NOT pressure any provider of services, goods, or facilities to circumuent industry professional standards. Equally, members shall NOT respond to any such PRESSURE placed upon them.
• ________ in Advertising: NAMB members shall provide ACCURATE information in all advertisements and solicitations.
• ________: NAMB members shall not disclose UNAUTHORIZED confidential information
• ________ with Law: NAMB members shall conduct their business in COMPLIANCE with all applicable laws and regulations.
• ________ Of Financial Interests: NAMB members shall disclose any equity or financial INTEREST they may have in the collateral being offered to secure a loan.

Answer 3

A. National Association of Mortgage Brokers (NAMB)
B. Integrity
C. Conduct
D. Honesty
E. Confidentiality
F. Compliance
G. Disclosure

Question 4

Ethical and Legal Considerations:
National Association of Mortgage Brokers (NAMB):
In 2008, NAMB instituted the award called the _______ for its most prestigious members. To qualify to use and advertise the seal, MLOs undergo a rigorous _______ process and must meet NAMB’s high national standard for ethics, professionalism, integrity, and service. This seal is the nation’s first national standard for licensed MLOs. In addition to character investigation, annual education requirements must be met, with courses requiring study in ETHICS, INTEGRITY, and other topics that raise the _______ level of the MLO.

Answer 4

A. Lending Integrity Seal of Approval
B. validation
C. professionalism

Question 5

Ethical and Legal Considerations:
By participating in and adhering to the standards implemented by NAMB, MLOs are working to improve themselves and the mortgage industry. Membership is ______ to anyone in the mortgage or affiliated industries. By developing ethical behavior, practicing professionalism, and promoting integrity, MLOs can help to ensure the reputation of their profession. To accomplish this, it takes every licensee and registered originator to follow the professional standards set for them.

Answer 5

A. Open

Question 6

Ethical and Legal Considerations: Penalties for Unethical Behavior:
When an MLO behaves in an _______ manner or otherwise breaches his professional obligations, there are several possible consequences:
• ACTION by the state licensing and regulatory authority.
• _______ lawsuits filed by injured parties.
• ________ action by professional associations.
• Filing of ______ charges (in very serious cases).

Answer 6

A. unethical
B. Civil
C. Disciplinary
D. criminal

Question 7

Ethics in Advertising:
An MLO spends hours every day dealing with the details of the industry. However, most consumers are significantly less informed and buying or refinancing a home is usually a stressful and confusing undertaking.
According to the ______, many consumers begin their search for a mortgage by reviewing printed advertisements in newspapers or magazines. Television and radio commercials–as well as the Internet–are also used more frequently as a means of advertising mortgages and other loan products. According to The Truth In Lending Act TILA Regulation ______, an advertisement is a commercial message in any medium that promotes, directly or indirectly, a credit transaction. This Act is the federal regulation that has the primary responsibility of overseeing _______.

Answer 7

A. Better Business Bureau (BBB)
B. The Truth In Lending Act TILA / Regulation Z
C. advertising

Question 8

Ethics in Advertising:
While there are obviously many laws in place to protect consumers, potential customers generally rely on the honesty and integrity of those mortgage professionals with whom they deal.
The Federal Trade Commission has the authority to act in the interest of all consumers to prevent deceptive and unfair acts or practices. Title ___ Section ___ of the Federal Trade Commission Act prohibits unfair or deceptive practices of ANY kind, which includes _____ in ANY medium. Therefore, advertising must be designed to tell the truth and NOT mislead consumers.
A claim can be misleading if either it implies something that is NOT true or if relevant information is LEFT out.
For example, an advertisement for a loan that promotes “$0 Down” may be misleading if significant charges that are due at CLOSING are NOT _____ in the ADVERTISEMENT .

Answer 8

A. Title 15: Section 5
B. advertising
C. disclosed

Question 9

Ethics in Advertising:
To comply with the mandate to be truthful and fair, advertising should NOT:
• Misrepresent _______ FACTS or make ______ PROMISES likely to influence, PERSUADE, or INDUCE an applicant for a mortgage loan or mortgagor to take a mortgage loan
• Can NOT ______ any material factors, terms, or conditions of a transaction to which the MLO is a party, including the receipt of payment from a third party, pertinent to an applicant for a mortgage loan or a mortgagor.

Answer 9

A. Material
B. False
C. Conceal

Question 10

Ethics in Advertising:
Regulation N:
Prohibited Representations:
As part of the Credit Card ______ Act of 2009, the Federal Trade Commission (FTC) implemented and the CFPB adopted additional rules under Regulation ____
- Prohibited Representations. These advertising RULES known as the _________ (MAP) Rules are designed to PROHIBIT misrepresentations in a commercial communication regarding mortgage products

Answer 10

A. Credit Card Accountability, Responsibility, and Disclosure Act of 2009
B. Regulation N - under the Federal Trade Commission
C. Mortgage Acts and Practices Rules (MAP Rules)

Question 11

Ethics in Advertising:
Mortgage Acts and Practices:
The _____ (MAP) RULES provide guidance for the commercial communication of ANY message or statement using ANY medium, including written or oral statements, telemarketing SCRIPTS, the Internet, cellular networks, promotional materials, and web pages. These RULES, provide a LIST list of PROHIBITED acts and ADVERTISING prohibitions. ________ of the MAP rules is delegated to each individual STATE.
Advertisers are required to KEEP all COMMERCIAL communication of the mortgage credit product for a minimum of _____ months from the DATE of the last advertisement.

Answer 11

A. Mortgage Acts and Practices (MAP) rules
B. Enforcement
C. 24 Months

Question 12

Ethics in Advertising:
Misrepresentation and Material Facts:
Misrepresentation is more than mere “ ______,” which is an opinion that is not necessarily intended as a representation of fact, such as “best customer service in town!” When a misrepresentation is made to a consumer with the intent to ______ the consumer, it is a form of FRAUD and can result in PROSECUTION.
NOTE: Written disclosures or ____ PRINT in an ad may NOT be sufficient to CORRECT a misleading representation.

Answer 12

A. puffing
B. deceive
C. fine print

Question 13

Ethics in Advertising:
Misrepresentation and Material Facts:
Sometimes, a misrepresentation may be made UNINTENTIONALLY or through _______. While not necessarily _______ fraud, obviously, a mortgage professional has an obligation to consumers to be factually accurate IN ALL COMMUNICATION. Either way, misrepresentation is serious, especially when it involves _____ facts.

Answer 13

A. negligence
B. actionable
C. material

Question 14

Ethics in Advertising:
Misrepresentation and Material Facts:
When pursuing a claim of fraud or deception, it may not be necessary to prove that the person to whom the deliberate misstatement, misrepresentation, or omission was made was harmed financially in the transaction or that the person relied upon such misstatement, misrepresentation, or omission to make a _____ in the transaction. While criminal claims may require a higher STANDARD OF _______ to establish fraud or deception, administrative claims may only require that the bad acting person _______ tried to mislead an individual about a material fact.

Answer 14

A. Decision
B. Proof
C. Deliberately

Question 15

Ethics in Advertising:
Misrepresentation and Material Facts:
What is a
“material fact?” A material fact is generally defined as a fact that, if _________, might have caused a REASONABLE consumer to make a DIFFERENT decision.
For example, when offering a mortgage loan, material facts may include the loan’s:
• _______ percentage rate.
• _______ of loan term.
• If They Choose a ____ or _____ interest rate.
• _______ fees or other closing costs.
• _______ penalties.

Answer 15

A. known
B. Annual
C. Length
D. Fixed or Adjustable
E. Origination
F. Prepayment

Question 16

Ethics in Advertising:
Misrepresentation and Material Facts:
From a legal perspective, the misrepresentation of a material fact COULD POSSIBLY give a consumer grounds to ______ a contract. Because all the key terms of a mortgage loan constitute material facts, federal law requires significant disclosures to inform and protect the consumer.

Answer 16

A. Rescind

Question 17

Ethics in Advertising:
Bait and Switch:
When discussing advertising, one may hear the term bait and switch. This is a tactic of luring consumers in with promises of _____ RATES and SPECIFIC products, and then _______ otherwise QUALIFIED buyers to other terms so that the MLO can earn a ______ fee. The _______ Act addresses the practice of bait and switch in Title ___: Part ____:
“Bait advertising is an alluring but INSINCERE offer to sell a product or service which the advertiser in truth does NOT intend or want to sell. Its purpose is to SWITCH consumers from buying the ADVERTISED merchandise, in order to sell something else, usually at a _____ price or on a basis more advantageous to the advertiser:
The PRIMARY aim of a bait advertisement is to obtain LEADS as to persons interested in buying merchandise of the type so advertised.”

Answer 17

A. LOW
B. STEERING
C. Higher
D. Federal Trade Commission Act
E. Title 16: Part 238
F. Higher

Question 18

Ethics in Advertising:
Bona Fide Offer:
It is a violation of the Federal Trade Commission Act (FTC) to ______ the purchase of the ADVERTISED merchandise as part of a BAIT scheme to SELL other merchandise. When determining whether the INITIAL offer was ______ OR an offer made in good faith, these points NEED to be considered:
• The _____ of the advertiser to show, demonstrate, or sell the product offered in accordance with the terms of the offer.
• The ______ by acts or words of the ADVERTISED product or of the GUARANTEE, credit terms, availability of service, repairs or parts, or in any other respect, in connection with it.

Answer 18

A. discourage
B. bona fide
C. REFUSAL
D.disparagement (unkind remarks)

Question 19

Ethics in Advertising:
Bona Fide Offer:
When determining whether the initial offer was bona fide (i.e., an offer made in good faith), these points would be considered:
• The FAILURE to have the ADVERTISED product AVAILABLE, and at ALL outlets listed IN the advertisement. There must be a SUFFICIENT quantity of the advertised product to meet reasonably anticipated DEMANDS, UNLESS the advertisement CLEARLY and adequately _____ that supply is LIMITED and/ or the merchandise is available at SPECIFIC outlets.
• The refusal to take any REQUESTED _____ for the advertised merchandise that could be DELIVERED within a reasonable period of time.
• The showing or demonstrating of a product which is defective, unusable, or impractical for the purpose represented or implied in the _____.
• Use of a sales plan or method of compensation for salespersons or penalizing of salespersons, designed to PREVENT or DISCOURAGE them from _____ the advertised product.
NOTE: While some of these points may seem more relevant to personal property, such as appliances or automobiles, they could apply to mortgage products and services as well.

Answer 19

A. DISCLOSES
B. orders
C. advertisement
D. selling

Question 20

Ethics in Advertising:
Switch After Sale:
Section 238.4 of the FTC Indicates that NO practice should be pursued by an advertiser, in the event of a SALE of the advertised product, of “_______” an advertised product with the intent and purpose of selling other merchandise instead.
Included among acts or practices that will be considered in determining if the INITIAL sale was in good faith and not a STRATAGEM to sell other merchandise, are:
• Accepting a ______ for the ADVERTISED product, then switching the purchaser to a HIGHER-priced product.
• Failure to _______ on the contract for the advertised product within a REASONABLE time or to make a REFUND.
• ______ by acts or words of the advertised product, or of the guarantee, credit terms, availability of service, repairs, or in any other respect, in connection with it.
• The delivery of the advertised product, which is defective, UNUSABLE, or impractical for the purpose represented or implied in the _____.
NOTE: Remember, these actions are merely indications of a possible bait and switch ploy. There may be innocent reasons for these actions as well. In general,a ________ of conduct must be shown in order to prove a claim that an advertiser has engaged in this type of illegal act.
What if the consumer decided to accept different terms and apply for the loan anyway? According to 16 CFR Part 238, even though the facts are subsequently made known to the buyer, the law is violated if the FIRST CONTACT or INTERVIEW is secured by deception.

Answer 20

A. unselling
B. deposit
C. deliver
D. Disparagement
E. advertisement
F. PATTERN

Question 21

Ethics in Advertising:
Unfair and Deceptive Practices:
When determining whether an advertisement or practice is likely to be deceptive, the regulatory agency will examine it from the perspective of a consumer acting reasonably under the circumstances, examining the entire advertisement, transaction, or course of dealing.
Rather than focusing on certain words, the regulatory agency will look at the ad in context–including words, phrases, and images–to determine what it ______ to consumers.

Answer 21

A. Conveys

Question 22

Ethics in Advertising:
Unfair and Deceptive Practices:
_______ acts and practices (UDAAPs) can cause significant financial INJURY to consumers, ERODE consumer confidence, and UNDERMINE the financial marketplace. Under the _______Act, it is unlawful for any provider of consumer financial products or services or a service provider to ENGAGE in any unfair, deceptive, or abusive act or practice. This Act also provides the ______ with RULE-MAKING authority and, with respect to entities within its jurisdiction, ENFORCEMENT authority to prevent unfair, deceptive, or abusive acts or practices in connection with ANY transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. In addition, the CFPB has SUPERVISORY authority for detecting and assessing risks to consumers and to markets for consumer financial products and services.

Answer 22

A. Unfair, deceptive, or abusive acts and practices (UDAAPs)
B. Dodd-Frank Act
C. Consumer Financial Protection Bureau (CFPB)

Question 23

Ethics in Advertising:
Unfair and Deceptive Practices:
The CFPB has issued guidance on unfair and deceptive practices and established a standard of items that constitute what is an unfair and deceptive act:
________- It is considered unfair if:
1. The act causes or is likely to cause substantial injury (______ harm) to consumers,
2. The injury is NOT reasonably _______ by consumers
3. The injury is NOT outweighed by countervailing________ to the consumers OR to competition.

Answer 23

A. Unfair Practices
B. monetary
C. AVOIDED
D. BENEFITS

Question 24

Ethics in Advertising:
Unfair and Deceptive Practices:
The CFPB has issued guidance on unfair and deceptive practices and established a standard of items that constitute what is an unfair and deceptive act:
________: According to the CFPB, an act is considered deceptive if:
1. The representation, omission, act, or practice misleads or is likely to _____ the consumer,
2. The consumer’s interpretation of the representation, omission, act, or practice is ______ under the circumstances. and
3. The misleading representation, omission, act, or practice is _______.

Answer 24

A. Deceptive Practices
B. mislead
C. reasonable
D. material

Question 25

Ethics in Advertising:
Unfair and Deceptive Practices:
The CFPB has issued guidance on unfair and deceptive practices and established a standard of items that constitute what is an unfair and deceptive act:
_________: The CFPB further goes on to define abusive acts, which are acts that:
1. Materially interfere with the ability on the part of the consumer to reasonably ______a term or condition of a consumer financial product or service
2. Reasonably take advantage of:
• A lack of _______ on the part of the consumer of the material risks, costs, or conditions of the product or service
• The INABILITY of the consumer to ______ its own interests in selecting or using a consumer financial product or service
• The reasonable RELIANCE by the consumer on a covered person to act in the ______ of the consumer.
NOTE: While an act or practice may be ALL three types (unfair, deceptive, and abusive), be aware that there are three different legal _____, one for each type.

Answer 25

A. Abusive Practices
B. understand
C. UNDERSTANDING
D. protect
E. interests
F. TESTS

Question 26

Ethics in Advertising:
Examining Advertisements:
If the representation or practice affects or is directed primarily to a particular TARGETED group, such as the _____, the FTC examines REASONABLENESS from the perspective of that group.
For example, think about the advertisements on television for REVERSE mortgages, which are marketed for homeowners age 62 or older to take advantage of the EQUITY in their homes. These ads often employ well-known actors telling potential borrowers about the benefits of a particular loan product, but do NOT necessarily explain all the DETAILS. While there are, certainly, many regulations and requirements in place to PROTECT elderly borrowers such as REQUIRED Reverse Mortgage ______r requirements when considering advertisements, the FTC would examine the ad’s message from the perspective of an elderly homeowner.

Answer 26

A. elderly
B. counseling

Question 27

Ethics in Advertising:
Examining Advertisements:
To assist consumers in determining whether ADVERTISEMENTS for mortgage products are FAIR, the _______ distributed a consumer alert entitled “Deceptive Mortgage Ads: What They SAY; What They Leave OUT.”
The main points are summarized below:
• Consumers should be able to ______ ALL the terms and conditions of a proposed loan. They are advised to learn to read what’s BETWEEN the lines as well as what’s EMPHATICALLY stated in the ad.
• Some ads; whether Internet, television, paper, fax, or mail may LOOK tempting, but are FLAWED if they DO NOT ______ the true terms.
• The ____ is a CRITICAL factor in comparing mortgage offers from different lenders; sometimes the APR is HIDDEN in the FINE PRINT or buried deep in a WEBSITE .
• Important PAYMENT information is often EXCLUDED from an ad. Consumers should be prepared to ask about payments, terms, escrow, penalties, etc.
• Consumers are advised to consider SHOPPING with several lenders to compare ALL the FEES they charge and encouraged to ASK MLOs to see a LIST of mortgage RATES.
• Consumers are reminded that negotiating is OK and Totally ______.

Answer 27

A. Federal Trade Commission (FTC)
B. UNDERSTAND
C. disclose
D. APR
D. acceptable

Question 28

Ethics in Advertising:
Evaluating Buzzwords:
Federal Trade Commission (FTC)
The “______” on mortgage advertising also ADVISES consumers to look for certain BUZZWORDS that often appear in ads. Though these are not deceptive in and of themselves, when preparing an advertisement, the MLO should consider whether the use of such words or terms is FAIR, accurate, and COMPLETE within the CONTEXT of an advertisement.

Answer 28

A. consumer alert

Question 29

Ethics in Advertising:
Evaluating Buzzwords:
Taking time to evaluate such language will help the MLO remain in compliance with state and federal laws prohibiting deception.
Look at this example:
• Low “Fixed” Rate: If an ad indicates the availability of a “fixed” rate, it should also indicate how _____ it will be fixed.

Answer 29

A. long

Question 30

Ethics in Advertising:
Evaluating Buzzwords:
Taking time to evaluate such language will help the MLO remain in compliance with state and federal laws prohibiting deception. Look at this example:
• Very Low Payment Amounts: Such ads should tell the whole story. Is it an _____-only loan? Does it cover the INTEREST due (Amortize) ? Is it an adjustable rate loan?

Answer 30

A. interest

Question 31

Ethics in Advertising:
Evaluating Buzzwords:
Taking time to evaluate such language will help the MLO remain in compliance with state and federal laws prohibiting deception. Look at this example:
• Very Low Rates: Is the ad referring to a low “payment” rate OR a low-interest rate? There is a BIG difference, and it should be CLEAR to the consumer. Does the rate or payment apply ONLY for an INTRODUCTORY period? Ads with TEASER rates DON’T OFTEN disclose that. Consumers must be informed of all the details to avoid _____ when the rate and payment increase dramatically.

Answer 31

A. payment shock

Question 32

Ethics in Advertising:
Evaluating Buzzwords:
The FTC alert also provides examples of solicitation and advertising tactics that are intended to _____ consumers, such as a MAILER that has information about their mortgage that is NOT actually from their LENDER, or mailings with official-looking stamps, envelopes, forms, etc., that appear to be from a _______ agency.
Sadly, there are people and organizations willing to walk a fine line when it comes to deceptive advertising; consumers must be on their guard.

Answer 32

A. deceive
B. GOVERNMENT

Question 33

Ethics in Advertising:
Internet Advertising:
As members of the mortgage business community, MLOs advertise, provide guidance and counseling, and ACCEPT loan applications electronically via the Internet.
The Internet has become ______, and its power to reach potential consumers for products and services seems virtually limitless.

Answer 33

A. indispensable

Question 34

Ethics in Advertising:
Truth in Lending Act and Regulation Z:
Better Business Bureau
Advertising Guidance:
The BBB also offers general guidance related to advertising ethics, which includes considering these questions:
• Does your advertising result in _____ customers?
Your advertising is just another outlet through which you can promote good will and customer loyalty.
• Do you avoid IMPOSSIBLE ______ and guarantees?
When using the term “guarantee,” you MUST include a statement that explains complete details are available at the office or, in the case of mail or telephone sales, are freely available upon written REQUEST.
• Is the advertised merchandise or program READILY _____? When advertising to consumers, the merchandise or program must ACTUALLY be available to distribute to consumers responding to the advertisement.
• Is it your intent to _____ what is ACTUALLY being advertised? Avoid bait and switch tactics that involve advertising a LOW-priced item to attract customers, then persuading them to buy similar but HIGHER-priced items.
• Do you avoid using ______ INFERENCES?
Misleading advertising is considered a questionable business practice that should be avoided.
• Do ADVERTISED terms agree with the _____ facts? An advertisement may be misleading, even if every sentence SEPARATELY considered is literally true.
• Is the advertisement easy to _____ without asterisks and fine print? Asterisks used as a means of contradicting or substantially changing the meaning of an advertising statement should be avoided.
• Do you agree with your COMPARATIVES? You should be able to _____ all claims made in the ad.
• Are you _____ by your ad? If it is not attractive to you, it most likely will NOT be attractive to your customers.
Finally, MLOs must follow ALL laws and regulations (federal and state) related to advertising, such as the requirements to include the NMLS UNIQUE IDENTIFIER and ______ LOGO/SLOGAN must be applied to all ads, as applicable, and the DISCLOSURE requirements found in the ______ Act in Regulation ____.

Answer 34

A. SATISFIED
B. promises
C. available
D. SELL
E. misleading
F. MATERIAL
G. UNDERSTAND
H. substantiate
I. ATTRACTED
B. Equal Housing Lender
C. Truth in Lending Act and Regulation Z

Question 35

Civil Rights Act of 1866:
The _________ Act of 1866, codified in Title: ___ Section: ______ of the U.S. Code, prohibits public and private racial discrimination in any property transaction in the United States. The Act states:
“All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by _____ citizens thereof to INHERIT, PURCHASE, LEASE, SELL, HOLD, and CONVEY real and personal property.”

Answer 35

A. Civil Rights Act of 1866
B. Title: 42 Section: 1981
C. WHITE

Question 36

Civil Rights Act of 1866:
The 1866 Civil Rights Act applies to all property-real or personal, residential or commercial, improved or unimproved. The Act prohibits any discrimination against U.S. citizens based on race or ancestry and was upheld in 1968 by the United States ______ in the landmark case of JONES v. MAYER. The court ruled that the 1866 federal law “prohibits all racial discrimination, private or public, in the sale and rental of property”.
ENFORCEMENT of the Act by the FEDERAL government is based on Section ___ of the ____ Amendment to the U.S. Constitution, which empowers Congress to PROHIBIT SLAVERY.

Answer 36

A. United States Supreme Court
B. Section 2 of the 13th Amendment

Question 37

Civil Rights Act of 1866: Enforcement:
A person who has been unlawfully DISCRIMINATED against under the 1866 Act can sue ONLY in ______ DISTRICT court. The court fashions the remedies it finds necessary, which may include ________ also known as COURT ORDERS requiring the defendant to do or REFRAIN from doing a particular act, ________ DAMAGES also known as REIMBURSEMENT for expenses caused by the discrimination and/or for EMOTIONAL distress, or ________ DAMAGES also known as a way to punish the wrongdoer if the acts are DELIBERATE or MALICIOUS.
Depending on the circumstances, these remedies may be used instead of or in addition to those available to parties under other federal and state statutes. There is never any EXEMPTION to DISCRIMINATION under the ____ Act of 1866.

Answer 37

A. Federal District Court
B. injunctions
B. compensatory damages
C. punitive damages
D. Civil Rights Act of 1866

Question 38

Fair Housing Act:
Title ______ of the Civil Rights Act of 1968 is commonly called the _______ Act. The Fair Housing Act expanded the 1866 Act, making it illegal to discriminate in the sale or lease of residential property, including VACANT land intended for _____ housing. The Act has been amended several times and extends protection against discrimination based on the following protected classes:
• Race
• Color
• Religion
• National origin
• Sex (added 1974)
• Disability (added 1988)
• Familial status (added 1988)
Although the Fair Housing Act prohibits discrimination in housing against the _____, Congress further expanded protection with the more comprehensive ______ Act, which was signed into law in 1990.

Answer 38

A. Title VIII (Title 8)
B. Fair Housing Act
C. residential
D. Disabled
E. Americans with Disabilities (ADA) Act

Question 39

Fair Housing Act:
Fair Housing Act Exemptions:
The Fair Housing Act covers most residential transactions in the U.S., although there are specific EXEMPTIONS:
• The rental of a room or unit in a dwelling of NO more than four independent units, provided the owner occupies ______ unit as a residence
• Single-family home sold or rented by a private owner ____ the use of a broker
• Housing operated by _____ organizations
• Housing operated by ______ clubs

Answer 39

A. one
B. without
C. Religious
D. private

Question 40

Fair Housing Act:
Fair Housing Violations:
Lenders may DENY loans in neighborhoods where property values are ______; however, to NOT be in violation of the Fair Housing Act, the denial must be based on objective criteria regarding the condition and value of the property or area, NOT discriminatory characteristics of the borrower.
NOTE: In addition, it is illegal for anyone to threaten, coerce, intimidate, or interfere with anyone exercising a fair housing ______ or assisting others who exercise that right.

Answer 40

A. declining
B. right

Question 41

Fair Housing Act:
Fair Housing Violations:
The following discriminatory practices and activities violate the Fair Housing Act if they are based on a person’s membership in a protected class:

Example: A homeowner declines an offer after learning the buyer is of a different religion.

Violation: Refusing to rent or sell residential property after receiving a _______ offer.

Answer 41

A. good faith

Question 42

Fair Housing Act:
Fair Housing Violations:
The following discriminatory practices and activities violate the Fair Housing Act if they are based on a person’s membership in a protected class:

Example: A listing agent follows his seller’s instructions not to show the house to anyone of a different race.

Violation: _______ to negotiate for the sale or rental of residential property.

Answer 42

A. Refusing

Question 43

Fair Housing Act:
Fair Housing Violations:
The following discriminatory practices and activities violate the Fair Housing Act if they are based on a person’s membership in a protected class:

Example: A landlord includes the phrase “no children” in an advertisement for an apartment.

Violation: Using discriminatory advertising or any other notice that indicates a limitation or preference or intent to make any limitation, preference, or discrimination based on _____ status.

Answer 43

A. Familial

Question 44

Fair Housing Act:
Fair Housing Violations:
The following discriminatory practices and activities violate the Fair Housing Act if they are based on a person’s membership in a protected class:

Example: A landlord tells a potential tenant who has a foreign accent that the apartment is already rented, but shows the unit to someone who does not sound foreign.

Violation: Making any representation that property is NOT available for inspection, sale, or rent when it is, in fact, _______.

Answer 44

A. available

Question 45

Fair Housing Act:
Fair Housing Violations:
The following discriminatory practices and activities violate the Fair Housing Act if they are based on a person’s membership in a protected class:

Example: A landlord advises female applicants to include deposits with their rental applications but does not tell male applicants to ensure their applications are not processed.

Violation: Discriminating in the terms or _____ of any sale or rental of residential property or in providing any services or facilities in connection with such property.

Answer 45

A. conditions

Question 46

Fair Housing Act:
Discrimination in Mortgage Lending:
From the perspective of a mortgage professional, no one may take any of the following actions if the actions are based on a person’s membership in a ________:
• REFUSING to make a mortgage loan
• REFUSING to provide information regarding loans
• Imposing DIFFERENT terms or conditions on a loan, such as different interest rates, points, or fees
• DISCRIMINATING in the appraisal of property
• REFUSING to purchase a loan
• Setting DIFFERENT terms or conditions for purchasing a loan;

For example, a bank charging a HIGHER interest rate to a creditworthy borrower who wants to buy a house in a minority neighborhood than is charged for an EQUALLY creditworthy borrower in a different neighborhood.

Answer 46

A. protected class

Question 47

Fair Housing Act:
Discriminatory Practices:
The Fair Housing Act prohibits redlining, blockbusting, and steering in any real estate or mortgage credit transaction. These illegal acts are defined as follows:
_______: This is channeling prospective real estate buyers or tenants to or away from particular neighborhoods based on their race, religion, or ethnic background. Any such attempt to maintain or change the character of those neighborhoods is prohibited.

Answer 47

A. Steering

Question 48

Fair Housing Act:
Discriminatory Practices:
The Fair Housing Act prohibits redlining, blockbusting, and steering in any real estate or mortgage credit transaction. These illegal acts are defined as follows:
_______: This is a refusal to make loans-or making loans on less favorable terms–on property located in a particular neighborhood for discriminatory reasons. In the past, many lenders assumed that an integrated or predominantly minority neighborhood was automatically a place where property would decline over time. Based on that assumption, lenders refused to make loans in those neighborhoods. Since it was very difficult for borrowers to obtain purchase or renovation loans, it became the inability to properly market, maintain, or improve homes that caused neighborhood values to decline even further–a cycle from which few neighborhoods could recover.

Answer 48

A. Redlining

Question 49

Fair Housing Act:
Discriminatory Practices:
The Fair Housing Act prohibits redlining, blockbusting, and steering in any real estate or mortgage credit transaction. These illegal acts are defined as follows:
______: This is trying to induce owners to sell their homes by SUGGESTING that the ethnic or racial composition of the neighborhood is changing, with the implication that property values will DECLINE. This practice is also called _____ selling. The person making the prediction then BUYS the properties from the owners and RESELLS them for a profit.

Answer 49

A. Blockbusting
B. panic selling

Question 50

Fair Housing Act:
Discriminatory Practices:
Lenders may still deny loans in neighborhoods where property values are declining, but this must be based on objective criteria regarding the condition and value of the property or area. A lender may NOT simply equate integrated or minority neighborhoods with _____ property values.

Answer 50

A. declining

Question 51

Fair Housing Act:
Advertising Provisions:
The Fair Housing Act also prohibits discrimination in advertising, real estate brokerage, lending, and other services associated with residential transactions. To comply with this Act, ALL lenders are required to:
• Include the “______” slogan in any broadcast advertisement.
• Display the Equal Housing Opportunity poster in EVERY branch where mortgage loans are made.
• Display the Equal Housing Opportunity logo on ALL printed promotional material.

Answer 51

A. Equal Housing Lender

Question 52

Fair Housing Act:
Enforcement:
A person who has been discriminated against in violation of the Fair Housing Act may file a written complaint with the nearest _____ office within _____ year of the alleged violation. Complaints are investigated by the Office of ______. HUD may INVESTIGATE the incident or REFER the complaint to the state or local agency that has similar responsibilities (for example, a state civil rights commission). HUD usually tries to COMPEL and obtain VOLUNTARY compliance with the Fair Housing Act from violators PRIOR to taking any ACTION.
Parties involved in the discrimination controversy may choose to have their DISPUTE decided in a _____ lawsuit instead; in U.S. District Court or another court that has jurisdiction. The court may grant an ORDER for an ____, _____ DAMAGES, and _____ DAMAGES, and/or attorney’s fees. In addition, the U.S. Attorney General may bring a CIVIL SUIT in District Court against ANYONE engaged in an ongoing pattern or practice of discriminatory activities, referred to as a “______ or PRACTICE” lawsuit.

Answer 52

A. HUD
B. one
C. Fair Housing and Equal Opportunity (FHEO)
C. civil
D. injunction, compensatory damages, punitive damages,
E. pattern

Question 53

Fair Housing Act:
Discrimination and Same-Sex Marriage:
The United States Supreme Court, in OBERGEFELL et al. V. HODGES, Director; Ohio Department of Health, et al., decided June 26, 2015, provided that same-sex couples have the SAME right to marry as opposite-sex couples and CANNOT be discriminated against. With this decision, any PROHIBITION against same-sex married borrowers was made NULL & _____. A mortgage lender may NOT discriminate against married same-sex couples for any loan program.

Answer 53

A. Void

Question 54

The Equal Credit Opportunity Act:
The Equal Credit Opportunity Act (ECOA) Regulation _____, is a federal law that ensures that all consumers are given an equal chance to obtain credit. ECOA requires anyone who grants credit or sets the terms of that credit must never discriminate based on:
• Race
• Color
• Religion
• National origin
• Age (provided the applicant has the capacity to contract; i.e., 18 years old)
• Sex
• Marital status
• Receipt of income from public assistance programs
• Exercised rights under the _______ Act (CCPA)
The law also indicates that someone CANNOT be discouraged from applying for credit based on any of these factors.

Answer 54

A. Regulation B
B. Consumer Credit Protection Act

Question 55

The Equal Credit Opportunity Act:
The law protects a borrower against any creditor who regularly extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions.
Anyone involved in granting credit, such as real estate brokers and mortgage brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law. ECOA is implemented through Regulation _____ and enforced by the CFPB. It must be followed when:
• TAKING loan applications.
• EVALUATING an application.
• APPROVING or DENYING a loan.

Answer 55

A. Regulation B

Question 56

The Equal Credit Opportunity Act:
The law was originally passed in 1974 to PROHIBIT lending discrimination based on sex or marital status.
This law led to, among other things, the REQUIREMENT that credit bureaus maintain _____ credit files for married spouses, if so requested. The law ensured that women received the same consideration by lenders when applying for credit.
The law was expanded in 1976 to include the aforementioned ECOA protected classes. Most notable among the law’s revisions is prohibiting the discrimination against a potential borrower on PUBLIC ______.
If the borrower’s income from public assistance is stable (or permanent), the lender or mortgage broker must consider this income as valid as any other qualifying income. The adequacy and stability of a borrower’s income should be considered and NOT its source.

Answer 56

A. separate
B. public assistance

Question 57

The Equal Credit Opportunity Act:
Lenders and mortgage brokers must, therefore:
• Consider reliable public assistance income the SAME as other income.
• Consider reliable income from PART-time employment,
Social Security, pensions, and annuities.
• Consider RELIABLE alimony, child support, or separate maintenance payments if the borrower chooses to provide this information (lenders may ask for proof).
• Accept someone other than a SPOUSE as a co-signer, if needed.
While ECOA clearly indicates that a lender or mortgage broker must consider reliable alimony, child support, or separate maintenance payments as income, the applicant is not required to disclose such income.
Furthermore, an MLO may NOT discriminate against an applicant who exercises her good faith rights of ______ of those sources of income.

Answer 57

A. nondisclosure

Question 58

The Equal Credit Opportunity Act:
Among its many requirements, the ECOA also:
• Requires creditors to disclose to consumers what their rights are under ECOA, including a notice to the applicant of their right to receive a copy of any appraisal report on the property that was used in the credit decision-making process.
• Requires credit bureaus to maintain separate credit files on married spouses, if requested.
• Allows credit applicants to file discrimination complaints or bring a civil lawsuit for alleged discrimination.
• Requires creditors to maintain records of application and related information for _____ months (_____ months for business credit) after notifying the applicant of action taken.

Answer 58

A. 25 Months
B. 12 Months

Question 59

The Equal Credit Opportunity Act:
Considering Income:
When evaluating a potential borrower’s gross income, a creditor may consider the amount and probability of any income ______. A creditor may NOY:
• Refuse to consider PUBLIC assistance income the same way as other income.
• DISCOUNT income because of sex or marital status.
• Discount or refuse to consider income because it comes from part-time employment or pension, ANNUITY, or retirement benefits programs.
• Refuse to consider regular ALIMONY, child support, or separate maintenance payments.

Answer 59

A. continuing

Question 60

Study Hint:
The Equal Credit Opportunity Act:
To comply with ECOA, an MLO usually may NOT inquire about an interested borrower’s marital status. Nor can he ask about a _____ unless it is for a joint application and the spouse will use the account or be _____ liable, or if the applicant is relying on a spouse’s income, or alimony or child support from a former spouse, to qualify for the loan. When the loan is secured by property as with a mortgage the MLO may ask about a spouse, since in many states, certain rights and benefits exist for spouses.
For example, a lender must foreclose on a property, it may be necessary for the spouse to legally _____ those rights.
However, when permitted to ask about marital status, an MLO may NOT ask if the applicant is ______ or divorced.
The MLO may use only these terms:
• Married
• Unmarried (which includes single, divorced, or widowed)
• Separated
Additionally, he cannot ask an applicant about any plans for having or raising children but can ask questions about expenses related to any dependents.
In states that recognize ____ or ____ rights of spouses, which is interest in the real estate of a deceased spouse given by law to the surviving partner, it is acceptable to ask about marital status even if only ONE person is applying for the loan. In such states, the non-borrowing spouse must _____, since the non-borrowing spouse has an interest in the security instrument.

Answer 60

A. spouse
B. contractually
C. relinquish
D. widowed
E. dower or curtesy
F. consent

Question 61

The Equal Credit Opportunity Act:
Age of Applicant:
Creditors can consider the age of an applicant for credit under these circumstances:
• The applicant is too young to sign contracts, generally under age ____.
• The creditor would favor applicants age ____ and older.
• It is used to determine the meaning of other factors important to creditworthiness, such as to determine if an applicant’s income might drop because of pending retirement.
• It may be used in a valid credit scoring system that favors applicants depending on their age.

Answer 61

A. 18
B. 62

Question 62

The Equal Credit Opportunity Act:
Citizenship Status and ECOA:
“The creditor may ______ about the applicant’s permanent residence and immigration status in the United States in determining ______.”

Answer 62

A. inquire
B. creditworthiness

Question 63

The Equal Credit Opportunity Act:
Credit Decisions:
A creditor has ____ days after the receipt of a “_____” to provide a Notice of Action Taken to the applicant. If the credit decision is adverse:
• A notification must be in writing and must contain certain information, including the name and address of the creditor and the nature of the action that was taken.
• The creditor must provide an ECOA notice that includes the identity of the federal agency responsible for enforcing compliance with the act for that creditor. This notice is generally included in the notification of adverse action.
• The creditor must also provide the applicant with the specific principal reason for the action taken or disclose that the applicant has the right to request the reason(s) for denial within ____ days of receipt of the creditor’s notification, along with the name, address, and telephone number of the person who can provide the specific reason(s) for the adverse action. The reason may be given ORALLY if the creditor also advises the applicant of the right to obtain the reason in writing upon request.

Answer 63

A. 30 Days
B. complete application
C. 60 Days

Question 64

The Equal Credit Opportunity Act:
Credit Decisions:
Credit decisions will generally take the following written form:
• _______ - a Commitment Letter is provided to the applicant
• ______ - a Notice of Incomplete Application is provided to the applicant
• _______ (or offered less favorable or different terms) -
- a Statement of _____ is provided to the applicant
The Statement of Adverse Action must include specific reasons for the decision or inform the applicant of the right to request specific reasons for the decision within _____ days of a credit decision. Additionally, borrowers have a right to a copy of the appraisal report used in the decision process upon completion of the appraisal or NO later than ___ business days before settlement.

Answer 64

A. Approved
B. Incomplete
C. Denied
D. Adverse Action
E. 60 Days
F. 3

Question 65

The Equal Credit Opportunity Act:
Loan Application: Home
Mortgage Disclosure Act
Reporting Requirement:
Under the _____ Act Regulation ____, it is permissible to ask an applicant (for a loan to purchase or to refinance a principal residence) for certain information for the federal government’s use in monitoring lender compliance with equal credit and equal housing laws. The information that is required to comply with HMDA is in Section _____ of the URLA or the _______. To follow the mandates of the Dodd-Frank Act, information must be collected to reveal any patterns of discriminatory practices by the creditor.

Answer 65

A. Home Mortgage Disclosure Act (HMDA) Regulation C
B. Section X
C. 1003

Question 66

The Equal Credit Opportunity Act:
Loan Application:
Home
Mortgage Disclosure Act:
Reporting Requirement:
The three areas of concern for compliance with anti-discrimination laws are ____, _____, and _____. It is critical that the MLO has a polished presentation when inquiring about the sex, race, and ethnicity of the borrower, and co-borrower, as the inquiry at many times will seem invasive or appear unnecessary to the consumer. An MLO must stress the importance of collecting the information to comply with federal regulations.

Answer 66

A. ethnicity, sex, and race

Question 67

The Equal Credit Opportunity Act:
Loan Application: Home
Mortgage Disclosure Act
Reporting Requirement:
A future new mortgage loan application will replace the current URLA and will include more requirements.
If a borrower identifies as:
• Hispanic/Latino, he is further asked to identify whether he is:
o Mexican
o Puerto Rican
o Cuban
• And Other Central American countries
• American Indian or Alaska Native, he is further asked to provide the name of the principal tribe he is a member of.
• Asian, he is further asked to identify whether he is:
• Asian Indian
O Asian Chinese
Asian Filipino
• Other Asian, where he can provide additional details about his heritage.
• Native Hawaiian or Other Pacific Islander, he is further asked whether he is:
o Samoan
O Fijian
o Tongan
NOTE: If a borrower _____ to provide his ethnicity, sex, and race information, there can be NO pressure to complete the inquiry. The borrower cannot be discriminated against because he does NOT ______ these information sections.

Answer 67

A. declines
B. complete

Question 68

The Equal Credit Opportunity Act:
Loan Application: Home
Mortgage Disclosure Act:
Reporting Requirement:
When meeting a borrower face-to-face, the MLO MUST complete this section if the applicant ______ to supply the requested information.
“If a financial institution accepts an application through electronic media with a video component, it must treat the application as taken in person. However; if a financial institution accepts an application through electronic media without a video component, it must treat the application as accepted by ____.”

Answer 68

A. declines
B. mail

Question 69

The Equal Credit Opportunity Act:
Loan Application:
Home Mortgage Disclosure Act:
Reporting Requirement:
Data transparency helps to ensure that financial institutions are NOT engaging in discriminatory lending or failing to meet the credit needs of the entire ______, including low- and moderate-income neighborhoods.
The gathering of information that can detect a creditor’s discriminatory patterns is at the heart of HMDA. By stipulating a review of the data of a lender’s origination business, the Fair Housing Act and ECOA have a greater opportunity for ensuring compliance and borrower receipt of equal consideration when requesting a credit decision.

Answer 69

A. community

Question 70

The Equal Credit Opportunity Act:
Loan Application: Home
Mortgage Disclosure Act
Reporting Requirement:
As the name implies, HMDA is a disclosure law that relies upon ______ for its effectiveness. It does NOT prohibit any specific activity of lenders and it does NOT establish a _____ system of mortgage loans to be made in any _______ or other geographic area as defined by the Office of Management and Budget.
The HMDA provisions affect applications for residential loans, including:
• Home PURCHASE
• Home IMPROVEMENT
• REFINANCING
• SUBORDINATE financing
NOTE: These provisions do NOT apply to loans on vacant land, NEW construction, or loans that are sold as part of a POOL for servicing.

Answer 70

A. public scrutiny
B. quota
C. metropolitan statistical area (MSA)

Question 71

The Equal Credit Opportunity Act:
Enforcement:
Home Mortgage Disclosure Act:
Regulation C:
ECOA is enforced by the CFPB; however, each financial institution further falls under the authority of its respective regulatory agency. Consumers who apply for credit and feel they have been unjustly discriminated against may file a complaint with the same bodies as for other types of discrimination claims.
Any creditor that fails to comply with a requirement imposed by ECOA is subiect to civil liability for actual and punitive damages in individual or class actions.
Liability for punitive damages can apply only to nongovernmental entities and is limited to $_______ in individual actions and the lesser of $______ or ____% of the creditor’s net worth in class actions. A civil action may be brought in the appropriate United States district court within ____ years after the date of the occurrence of the violation.

Answer 71

A. $10,000
B. $500,000
C. 1%
D. two

Question 72

The Equal Credit Opportunity Act:
Community Reinvestment
Act (CRA):
Congress enacted the _______ Act
in 1977 to encourage financial institutions to help meet the credit needs of the communities in which they operate, including low-and moderate-income neighborhoods, consistent with safe and sound lending practices.
The CRA requires that each insured depository institution’s record in helping meet these needs of its entire community be evaluated _____.
That record is taken into account when considering an institution’s application for deposit facilities, including mergers and acquisitions. CRA examinations are conducted by the _____ agencies that are responsible for supervising depository institutions.
In some states, the requirements of CRA have been EXTENDED to mortgage lenders. Make sure you know the laws of the states in which you conduct business.

Answer 72

A. Community Reinvestment Act
in 1977
B. periodically
C. federal

Question 73

The Equal Credit Opportunity Act:
Other Types of Discrimination:
Blatant discrimination still exists but it is less common today. Nonetheless, there are subtler ways–both intentional and unintentional–that may amount to discrimination. INTENTIONAL decisions to treat people differently based upon race or other protected characteristics are referred to as _____.
_____ , on the other hand, does NOT REQUIRE INTENTION to discriminate. Instead, it refers to practices that are intended to be NEUTRAL but are shown to have a NEGATIVE impact upon a particular protected class.
Regardless of intention, it still qualifies as a form of discrimination. If an MLO is ever in doubt about what qualifies as discrimination, she should talk with her broker or an experienced mortgage professional.

Answer 73

A. disparate treatment
B. Disparate impact

Question 74

The Equal Credit Opportunity Act:
Discrimination in Municipal Actions:
______ zoning laws are defined as any laws that have the effect of denying housing to minorities or other protected classes. The clause “make otherwise unavailable or deny” in anti-discrimination legislation has been interpreted to prohibit such exclusionary zoning. Since it is currently unlikely that a municipality would enact an openly RACIST ordinance, these cases usually involve arguments based on the concept of ______. As discussed, a law with this violation may be neutral on its face, but it has a discriminatory effect since it has a greater adverse impact on one group than on others.

Answer 74

A. Exclusionary
B. disparate impact

Question 75

The Equal Credit Opportunity Act:
Discrimination in Municipal Actions:
Exclusionary zoning cases usually involve ordinances that prohibit or unreasonably restrict multi-family or low-income housing. Statistics show that in comparison to the white population, members of minority groups are more likely to be low-income. As a result, it has been successfully argued in a number of cases that ordinances _____ low-cost housing have a disparate impact on minority groups; in effect, excluding them from certain communities.

Answer 75

A. limiting

Question 76

The Equal Credit Opportunity Act:
The Fair Housing Act:
Discrimination in Advertising:
Words carry great power. The use of certain words can influence, inform, and sometimes, _____ consumers, and the misuse of words, even if unintentional, can create problems.
For example, certain phrases used in residential mortgage advertising could convey either overt or ______ discriminatory preferences or limitations.
In addition to outlawing discrimination in housing, the Fair Housing Act restricts the publication of any real estate ADVERTISING that indicates a limitation, preference, or intent to discriminate based on race or other protected class.

Answer 76

A. mislead
B. tacit

Question 77

The Equal Credit Opportunity Act:
The Fair Housing Act:
Discrimination in Advertising: Specifically, of the ______ Act states that it is:
“… unlawful to make, print, or publish, or cause to be made, printed, or published, any notice, statement, or advertisement, with respect to the sale or rental of a dwelling, that indicates any preference, limitation, or discrimination because of race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination. However, the prohibitions of the Act regarding familial status do not apply with respect to housing for older persons..

These provisions apply to advertisements for residential mortgage loans as well. Under certain circumstances, even the ____ chosen for advertising may be held to have the effect of RACIAL or RELIGIOUS steering.
Examples include statements such as “______”
“_______,” and “English speakers only”.
MLOs should choose their words very carefully and should measure whether advertising content could be construed as being in violation of the Fair Housing Act.

Answer 77

A. Fair Housing Act
B. newspapers
C. loans for men
D. Christian financing

Question 78

The Equal Credit Opportunity Act:
The Fair Housing Act:
Discrimination in Advertising:
And it’s not just the words. An appendix to the Fair Housing Act indicates that human _____ in photographs, drawings, or other graphic techniques may NOY be used to indicate exclusiveness because of race, color, religion, sex, handicap, familial status, or national origin. If models are used in display advertising campaigns, the models should be clearly definable as reasonably representing majority and minority groups in the metropolitan area, both sexes, and, when appropriate, families with children. Models, if used, should portray persons in an equal social setting and indicate to the general public that the housing is open to all without regard to race, color, religion, sex, handicap, familial status, or national origin, and is not for the _____ use of one such group.

Answer 78

A. models
B. exclusive

Question 79

Study Hint:
The Equal Credit Opportunity Act:
All mortgage industry professionals are required to observe these federal laws, as well as the anti-discrimination statutes and laws passed by their state and local governments. If you are accepting a mortgage application and the property is in another state other than where you normally do business, it is your responsibility to research any specific laws and regulations for that _____. Also, know the licensing requirements in that state.

Answer 79

A. state

Question 80

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Recall that the ______ of 1974 requires mortgage lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures of the nature and costs of the real estate settlement process. Its purpose is to regulate settlement and closing procedures and to protect borrowers.

Answer 80

A. Real Estate Settlement Procedures Act
(RESPA)

Question 81

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Section ______ of RESPA Regulation ____ prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service providers involving a federally-related mortgage loan. RESPA also prohibits ______ and receiving UNEARNED fees for settlement services NOT actually performed.

Answer 81

A. Section 8 Regulation X
B. fee splitting

Question 82

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Key terms related to these provisions include “thing of value” and “referral.” RESPA defines a ________ to include any payment, advance, funds, loan, service, or other consideration.
A _______ includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection of a settlement services provider. A referral also occurs when a borrower is required to use a particular PROVIDER of settlement services.

Answer 82

A. thing of value
B. referral

Question 83

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Allowable Fees:
Fees, salaries, compensation, or other payments for services ACTUALLY rendered and that are not based SOLELY on a referral do not violate RESPA.
These include:
• A payment to an attorney at law for services actually rendered
• A payment by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance
• A payment by a lender to its ______ agent or contractor for services actually performed in the origination, processing, or funding of a loan
• A payment to any person of a _____ salary or compensation or other payment for goods or facilities actually furnished or for services actually performed
• A payment pursuant to a cooperative brokerage and referral arrangements or agreements between real estate agents and real estate brokers (this does NOT apply to any fee ______ between real estate brokers and mortgage brokers or between mortgage brokers.
• Normal promotional and educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business
• An employer’s payment to its own employees for any referral activities

Answer 83

A. DULY APPOINTED
B. bona fide salary
C. arrangements

Question 84

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Multiple Services:
When a person already providing services in a position to refer settlement service providers–such as an attorney, MLO, real estate broker or agent, or developer or builder-receives a payment for providing additional settlement services as part of a real estate transaction, such payment must be for services that are ____, _____, and _____ from the primary services provided by such person.

Answer 84

A. actual, necessary, and distinct

Question 85

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA: Required Use:
According to RESPA definitions, a ______ occurs when a consumer paying for a settlement service is REQUIRED to use a particular provider of that settlement service. While RESPA makes clear that the use of both economic incentives and disincentives to improperly influence a consumer’s choice of settlement service providers are prohibited, this provision does NOT prohibit ________ on services to consumers.

Answer 85

A. required use
B. legitimate discounts

Question 86

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA:
Required Use:
RESPA provides that settlement service providers can offer _____ to consumers by offering a ______ at a total price LOWER than the sum of the individual settlement services.
This combination of services will NOT be considered a prohibited “_______” if:
1. The use of any such combination is OPTIONAL to the purchaser, and
2. The LOWER price for the combination is not made up by higher costs elsewhere in the settlement process.

Answer 86

A. legitimate discounts
B. combination of settlement services
C. required use

Question 87

Kickbacks and Referral Fees per Real Estate Settlement Procedures Act / RESPA: Violations:
Violations of Section 8’s anti-kickback, referral fees, and unearned fees provisions of RESPA are subject to criminal and civil penalties.
• In a ______ case, a person who violates Section ___ may be fined up to $______ and/or be imprisoned up to _____ year.
• In a ________ lawsuit, a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to _____ times the amount of the charge paid for the service.

Answer 87

A. criminal
B. Section 8 of RESPA
C. $10,000
D. One
E. Civil
F. three

Question 88

Mortgage Fraud:
Being honest with everyone requires the MLO to avoid fraud–intentional or unintentional–at all times. Either may lead to civil and even criminal penalties.
_______ is an unintentional breach of a legal duty. It’s a tort if it causes harm, though, and the MLO can be sued for it.
_______ is intentional or negligent misrepresentation or concealment of material facts, which can include failing to disclose required information, actively concealing information, and making false or misleading statements.

Answer 88

A. Negligence
B. Fraud

Question 89

Mortgage Fraud:
________: This is an intentional misrepresentation or concealment of a material fact. This occurs when a person actively hides information or makes statements known to be false or misleading. When any of these are done with intent to deceive, they constitute actual fraud. (This is also called deceit or intentional misrepresentation).

Answer 89

A. Actual Fraud

Question 90

Mortgage Fraud:
Mortgage fraud involves any misrepresentation or concealment used in an attempt to obtain a mortgage loan. It can generally be divided into two main types of schemes:
_______: which is usually perpetrated by industry insiders.
_______: which is usually perpetrated by borrowers. Both types may be a serious federal crime when done to obtain any federally-related loan (which includes most loans, since HUD, FANNIE MAE, or a federally-chartered bank is involved at some point in the process).

Answer 90

A. Fraud for profit
B. fraud for property

Question 91

Mortgage Fraud:
________: This is a negligent misrepresentation or concealment of a material fact. When information is not disclosed or false statements are made unintentionally, it may be considered constructive fraud. Here, the false statements or failures to disclose are the result of carelessness or negligence, rather than an intent to deceive. (This is also called negligent misrepresentation.)

Answer 91

A. Constructive Fraud

Question 92

Mortgage Fraud:
Common ways in which fraud may be committed include:
• Material misrepresentations, such as ALTERED paycheck stubs and tax returns
• Material misstatements, such as stating an INTENT TO OCCUPY a home as a primary residence when the borrower really intends to use it as a RENTAL
• ________: such as failing to mention the borrower is taking an EARLY retirement in SIX weeks
The fraud can be perpetrated by borrowers or by industry insiders.
Some examples may be borrowers who LIE on applications, appraisers who provide an INFLATED property value, or mortgage brokers who IGNORE derogatory information to get a loan approved.
This may also include NOT reporting all items on the
HUD closing statement ACCURATELY, creating PHANTOM documents for verification, or CONCEALING the true nature of a borrower’s down payment

Answer 92

A. Omission

Question 93

Mortgage Fraud:
Fraud Participants:
Since many people are involved in the process of making loans for property, the opportunity for fraud exists on several levels. A fraud scheme could be simply the initiative of a desperate borrower, or it could involve the participation of multiple industry ______.

Answer 93

A. insiders

Question 94

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
When a borrower commits mortgage fraud, it is typically to obtain ________ to a property under false or fictitious pretenses. For example, a borrower may make the statement that he will “occupy the property as his primary residence” when he actually intends to acquire the property and use it as a rental. Or, a borrower may knowingly supply false documents, such as verification of employment (VOEs), forged W-2s, or false information on the loan application, thereby committing mortgage fraud, whether or not he is working in partnership with any mortgage professionals. The borrower usually plans to make regular payments and has no plans to default.
The purpose of the fraud is to make the mortgage loan happen at desirable terms for the borrower, not to go into foreclosure or flip a property for profit.

Answer 94

A. ownership

Question 95

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
A borrower might also act as a __________, which is someone who allows his name and personal details to be used to obtain a mortgage loan for a property he has NO intention of occupying. Sometimes, straw buyers are paid for their participation in the scheme and other times, straw buyers have NO IDEA that their personal information was used.

Answer 95

A. straw buyer

Question 96

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
Borrowers can also get involved in credit ENHANCEMENT schemes. To show the necessary assets or credit to qualify for a loan, borrowers may look for fraudulent ways to enhance their financial situation. For example, they may ____ their names to the bank accounts of friends or family to show that they have sufficient assets on deposit. Another scheme is where friends, family, or even builders or MLOs temporarily ______ assets into a borrower’s account until the underwriter qualifies the borrower and the loan closes. This type of fraud can be very sophisticated, even to the point of borrowers “_____” SEASONED credit account lines and creating fraudulent retailer relationships to improve the borrower’s credit history and credit scores.

Answer 96

A. add
B. park
C. buying

Question 97

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
If home values fall, some homeowners might find themselves UNDERWATER with their mortgage–OWING more than the property is _____. This could lead to foreclosure, as well as homeowners with little or no equity in the property walking away from their house and the loan. Such a situation might lead to “creative” schemes by borrowers to get out from under an unsustainable mortgage payment, including:
• ________: Homeowners apply for a mortgage to purchase a similar home that, because of the market, sells for less money. The homeowner may claim that he is renting the original property, perhaps engaging a family member or friend who claims to be the renter and even supplying a fake lease. After getting the new property, the borrower simply walks away from the first home and bails on that mortgage.

Answer 97

A. worth
B. Buy and Bail

Question 98

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
If home values fall, some homeowners might find themselves underwater with their mortgage–owing more than the property is worth. This could lead to foreclosure, as well as homeowners with little or no equity in the property walking away from their house and the loan. Such a situation might lead to “creative” schemes by borrowers to get out from under an unsustainable mortgage payment, including:

• ________: With a short sale, the lender agrees to allow the sale of the property to a third party for less than the balance owed and release its lien on the collateral property. Although a short sale does not bring a sufficient amount to pay the lender in full, the lender avoids foreclosure, including the need to acquire title and market the property, while getting the nonperforming loan off its books. Some lenders even agree to forgive any deficiency between the sale and the balance owed. A short sale is not necessarily fraudulent; however, if a borrower intentionally stops making mortgage payments to force default and then enlists the assistance of someone else-e.g., straw buyer-to purchase the property at a reduced price, fraud has most likely occurred.

Answer 98

A. Short Sale Fraud

Question 99

Mortgage Fraud:
Fraud Participants:
Borrowers:
Fraud for Property:
If home values fall, some homeowners might find themselves underwater with their mortgage–owing more than the property is worth. This could lead to foreclosure, as well as homeowners with little or no equity in the property walking away from their house and the loan. Such a situation might lead to “creative” schemes by borrowers to get out from under an unsustainable mortgage payment, including:
• ________: Some homeowners may resort to the crime of arson and file fraudulent ______ claims to obtain cash back or payment of the current property liens.

Answer 99

A. Arson
B. insurance

Question 100

Mortgage Fraud:
Fraud Participants:
Lenders and Brokers:
Lenders and mortgage brokers commit mortgage fraud by falsifying loan documents, making loans to straw buyers, illegally flipping properties, and other schemes.
Lenders benefit by making loans that should NEVER have been made and by selling them to the SECONDARY market as quickly as possible. Mortgage brokers benefit by collecting fees and ____ for creating fraudulent mortgage packages. Dishonest lenders and mortgage brokers see the opportunity to make a loan that results in a commission with high profitability. Often, these loans are knowingly made to unqualified buyers or even straw buyers who will never make a payment on the loan, resulting in foreclosure.

Answer 100

A. yield spread premiums

Question 101

Mortgage Fraud:
Fraud Participants:
Appraisers:
Appraisals are a critical aspect of mortgage lending.
An appraisal with inaccurate information–whether because of fraud or negligence-can have a serious impact upon a transaction.
An _____ scheme occurs when a property is intentionally appraised with a HIGHER-than-market value by an appraiser acting in collusion with a real estate agent, mortgage broker; or lender. Unscrupulous lenders hire only those appraisers who agree to “______,” regardless of the appraisal’s relationship to actual market value. When these mortgages are part of sales transactions, continued inflation of values in the same neighborhood creates a vicious cycle that results in appraisals at appraisals at higher-than-market values.
Even unsuspecting appraisers are caught in this web of deceit when they unknowingly use the inflated sale prices as comparables. This was a major factor contributing to the mortgage meltdown in 2007-2008.

Answer 101

A. inflated appraisal
B. hit the number

Question 102

Mortgage Fraud:
Fraud Participants:
Appraisers:
Appraisers now must subscribe to a set of rules and guidelines known as the ______. The appraiser is required by law and professional standards to act independently, impartially and objectively when performing his job. An appraiser must never accept an assignment that requires him to “hit a specific number” or bring the value in keeping with the client’s demands.
While inflated appraisals may be a more common form of fraud, deliberately understating the value of a property, for example, to allow someone to purchase a FORECLOSED home or _______ at a LOWER price is also fraud. ______ appraisals may also occur with a loan modification to ensure more FAVORABLE terms from a lender.

Answer 102

A. Uniform Standards of Professional Appraisal Practice (USPAP)
B. short sale
C. Understated

Question 103

Mortgage Fraud:
Fraud Participants:
Appraisers:
Appraisal Practices
Prohibited by TILA Regulation Z:
Regulation _____ was amended in 2009 specifically to address perceived abuses in the mortgage industry.
Pursuant to the regulation as amended, lenders, mortgage brokers, and their affiliates are prohibited from coercing, influencing, or encouraging an appraiser to misstate the value of the dwelling. For example, the law PROHIBITS these practices:
• Implying to an appraiser that current or future retention of the appraiser depends on the amount at which the appraiser values a consumer’s principal dwelling
• Excluding an appraiser from consideration for future engagement because the appraiser reports a value of a consumer’s principal dwelling that does not MEET or EXCEED a minimum threshold
• Telling an appraiser that a minimum reported value of a consumer’s principal dwelling is NEEDED to approve the loan
• Failing to compensate an appraiser because the appraiser does NOT value a consumer’s principal dwelling at or above a certain amount
• Conditioning an appraiser’s COMPENSATION on loan consummation

Answer 103

A. TILA Regulation Z

Question 104

Mortgage Fraud:
Fraud Participants:
Appraisers:
Appraisal Practices
Prohibited by TILA Regulation Z:
In addition, a lender cannot extend credit if the lender knows, at or before closing, that improper _______ has occurred by anyone unless the lender can document that it has acted with reasonable diligence to determine that the appraisal does not materially misstate or misrepresent the dwelling’s value.
The following practices are ALLOWED:
• Asking an appraiser to consider additional information about the dwelling or comparable properties or to correct FACTUAL errors
• Obtaining multiple appraisals of a consumer’s principal dwelling, UNLESS the creditor adheres to a policy of selecting the most reliable appraisal, rather than the appraisal that states the HIGHEST value
• Withholding compensation from an appraiser for breach of contract or substandard PERFORMANCE of services as provided by contract

Answer 104

A. coercion

Question 105

Mortgage Fraud:
Fraud Participants:
Other Industry Insiders:
• _______: may assist in the preparation of false documentation, such as sales contracts or property inspections, and in finding straw buyers for a property. Real estate brokers and agents collude in flipping schemes by finding borrowers for scams and by raising listing prices of homes to make an over-inflated appraisal value appear valid. Unscrupulous real estate agents may also steer borrowers to a specific lender in exchange for kickbacks or other consideration.
• _______: may use sub-par material, removing materials or fixtures after an appraisal, providing straw buyers, and improperly influencing appraisers, loan officers, and title companies.
• _______: may falsify occupancy rates on their rent rolls or otherwise misrepresent the condition of rental units or incomplete renovations.
Other industry professionals may be involved in fraud to different degrees and in some of the following ways:
• ________: may prepare bogus deeds and get them duly recorded in public records with the participation of government workers.
• ________: may falsify tax returns, profit and loss statements, and other documentation required by lenders to qualify loans.
• _______: may charge borrowers fees for services never provided at the closing or may complete incorrect title reports that omit valid liens or that create false chains of title.
• _______: may falsify deeds and other records.

Answer 105

A. Real estate agents
B. Rehabbers and FSBO (For Sale By Owner) flippers
C. Investment property owners
D. Attorneys
E. Accountants
F. Title companies
G. Government workers

Question 106

Mortgage Fraud:
Flipping:
Another common and well-known mortgage fraud scheme is ______. “Flipping” as it has long been understood to mean that an investor has remodeled a property and quickly sold it for a profit.
If the investor bought the property below market and remodeling has brought it up to true market value, this is the good side of flipping and is completely _____.
It also serves the public well as it increases property values, improves neighborhoods, and provides housing that otherwise might not be available.

Answer 106

A. illegal property flipping
B. legal

Question 107

Mortgage Fraud:
Flipping:
Illegal flipping is something else entirely. _____ generally requires collusion between the seller, buyer, appraiser, and lender/broker. An illegal property-flipping scheme occurs when a property is purchased at a LOW price, appraised at an INFLATED value without any VALID reason for the increase, and then resold at a much HIGHER price. It may involve a series of sales and quick resales, with _____ property and a group of sellers and buyers changing ownership _____ them.

Answer 107

A. Illegal property flipping
B. one
C. among

Question 108

Mortgage Fraud:
Flipping:
A home in an illegal flipping scheme is typically resold at a new, higher price fairly soon after its initial purchase. Statistics show that the criminals involved in these schemes do not wait long time periods to sell, often only weeks or perhaps a few months at most.
At the end of the scheme, there is usually a mortgage lender forced to FORECLOSE on a property with a VALUE that is _____ to SATISFY its lien.

Answer 108

A. insufficient

Question 109

Mortgage Fraud:
Attributes of Flipping Schemes:
Typically, flipping schemes are more PREVALENT in _____ areas where higher-priced homes are located near lower-priced homes in poor repair and home values FLUCTUATE. These neighborhoods often include rental properties and tend to have HIGHER rates of _____, which can adversely affect property values.

Answer 109

A. mixed-value
B. crime

Question 110

Mortgage Fraud:
Attributes of Flipping Schemes:
Homes involved in flipping schemes are often purchased at LOW prices because they are in POOR condition. The _______ nature of these properties can include BROKEN pipes, NO ELECTRICAL wiring, or other items in disrepair. When repairs are made after the purchase by fraudulent buyers, they are generally _______ or exterior-only repairs.

Answer 110

A. distressed
B. cosmetic

Question 111

Mortgage Fraud:
Attributes of Flipping Schemes:
Another COMMON attribute of illegal flipping is that perpetrators rarely use _____ entities to handle the loan.
As a result, the underwriter who reviews the loan is NOT based locally and is unfamiliar with the property and neighborhood, making it more likely that they will be deceived.

Answer 111

A. local

Question 112

Mortgage Fraud:
FHA Response to Flipping Schemes:
The FHA requires sellers to own a property for at least _____ months prior to a new sale involving FHA-insured financing. For resales ranging from _____ to ____ days, the FHA imposes additional requirements to decrease the possibility of illegal flipping.
> FHA rules include:
• The FHA will NOT insure any resale properties unless the owner of record is the _____. This prevents thieves from flipping properties without ever having legally OWNED them.
• Resales that take place ____ to _____ days after the initial sale can be FHA-insured ONLY if there is a ____ appraisal that matches a resale threshold percentage established by HUD. The second appraisal may NOT be paid for by the borrower. If there is more than a ___% difference in property value between the two appraisals, the LOWER value must be used by the lender.
• The resale price may NOT be more than _____% over the price paid by the seller to acquire the property.
There are exceptions in cases of relocation, HUD’s REO program, approved nonprofits, local, state and federal government agencies, inheritance and disaster areas.

Answer 112

A. three (3)
B. 91-180 days
C. seller
D. 91-180 days
E. second
F. 5%
G. 100%

Question 113

Mortgage Fraud:
FHA Response to Flipping Schemes:
NOTE: Recall that ______ required that if the price difference exceeds ______% of the seller’s original acquisition cost during the first ___ days or _____% of the original cost during the first _____ months, creditors are REQUIRED to obtain a second appraisal.
This requirement for new home purchase mortgage loans is intended to address fraudulent property flipping by seeking to ensure that the value of the property legitimately _____. The borrower CANNOT pay for the cost of the second appraisal report.

Answer 113

A. HIGHER-priced loans (HPML)
B. 10%
C. 90 Days
D. 20%
E. Six Months
F. increased

Question 114

Mortgage Fraud:
Other Types Of Mortgage Fraud:
______: This loan scam involves loans made on NONEXISTENT properties.
For example, a broker enlists or creates a straw buyer, identifies fictional properties, opens accounts for payments, and maintains custodial accounts for escrow pavments. A bank of telephones in an office may even be set up, with one phone line used for the employer, one for the appraiser, etc., for verification purposes.

Answer 114

A. Air Loan

Question 115

Mortgage Fraud:
Other Types Of Mortgage Fraud:
________: In this loan scam, the seller’s signature on the deed is forged, meaning the real homeowner is not even aware the property is being fraudulently transferred. The deed is recorded; the thief mortgages the property with cash-out refinancing, and then pockets the money and walks away without making a payment
NOTE: Once again, the owner has no idea the property has even been transferred. This scheme typically takes place for properties that are paid in FULL, VACANT, or when the owners are having trouble making their mortgage payments.

Answer 115

A. Deed Scam

Question 116

Mortgage Fraud:
Other Types Of Mortgage Fraud:
_________:
This loan scam is instigated in various ways.
One method involves the primary mortgage holder who sells the loan on the ______ market.
In this instance, the loan is sold to a fraudulent company that, supposedly, will service the loan (and receive the mortgage payments). However, when a payment is received, the fraudulent company simply steals the money. The property eventually goes into foreclosure due to nonpayment.
Another method of devising this loan scam is when a borrower signs multiple copies of the same documents and the MLO submits each “set” of the loan papers to different lenders. When the loan is approved by more than one lender, the MLO forges a _____ set of closing documents, delivers them to a second lender, and keeps the proceeds.

Answer 116

A. Double Sold Loans
B. secondary
C. duplicate

Question 117

Mortgage Fraud:
Other Types Of Mortgage Fraud:
_______: In a down market, it’s not unusual for a seller to make CONCESSIONS to entice a buyer. These concessions could even include financing some of the purchase price for the buyer.
For example, let’s say that the buyer applies for a 75% first mortgage, agrees to pay 5% down, and gives the seller a second mortgage at 20% of the sale price. This second mortgage will NOT be _____ until closing so the lender will think the buyer is putting 25% down.
The buyer may have every intention of paying the seller, but this ______ second-also called a ______ –is a type of mortgage fraud, and it could be quite a risk for the seller. If the buyer does not pay the second mortgage loan, the seller will not be able to foreclose to get the property back. Even if the seller does, at some point, record the mortgage, there may be other liens by that time against the property or the property owner that would have PRIORITY over the second mortgage.

Answer 117

A. Unrecorded or Silent Second
B. recorded
C. unrecorded
D. silent second

Question 118

Mortgage Fraud:
Other Types Of Mortgage Fraud:
_________: A more common variation on the silent second scheme is when the buyer has NO intention of paying the second mortgage.
For example, schemers find uninformed buyers willing to sign a sales contract beyond market price with an enticement such as “seller will help finance.” In these cases, the seller holds a _____ mortgage and presents it to the lender as if it were an actual mortgage to INDUCE the bank to loan a higher amount WITHOUT the need for mortgage insurance.
Once the transaction closes, the seller DESTROYS the mortgage, sometimes even gives it back to the BUYER immediately. This is called a disappearing second.
The lender thinks it has an ____% LTV loan; for example, when it may actually be _____% LTV.

Answer 118

A. Disappearing Second
B. second
C. 80% LTV
D. 100% LTV

Question 119

Mortgage Fraud:
Other Types Of Mortgage Fraud:
________: In this scam, e-mail messages or letters promise to ELIMINATE mortgage loans or get RID of credit card debt in return for paying a FEE. The consumer pays the money but gets nothing in return. Consumers desperate to eliminate their crushing debt are most vulnerable to these schemes. The e-mail messages or letters often offer credit counseling or are sent under a name like “_______,” implying a legitimate business performing a public service.

Answer 119

A. Email/Mail Scams
B. American Credit Counseling

Question 120

Mortgage Fraud:
Other Types Of Mortgage Fraud:
_______: A false identity is when someone uses another person’s identity on a loan application without the knowledge of the rightful property owner. An identity can be stolen in a variety of ways, including such common scenarios as applying for a job or from discarded documents.

Answer 120

A. Identity Theft

Question 121

Mortgage Fraud:
Other Types Of Mortgage Fraud:
________: Many times, a thief needs only one piece of information–a _______–to steal an identity. Today, counterfeit Social Security numbers are relatively easy to obtain. Thieves use RETIRED numbers (due to death), numbers issued to someone ELSE, STOLEN numbers, or numbers issued before the borrower’s birth YEAR. Thieves also use ALTERED employment records, bank statements, and pay stubs to commit identity theft. With this information, they are able to impersonate homebuyers and sellers using actual, verifiable identities that give the mortgage transactions the appearance of legitimacy.

Answer 121

A. Identity Theft
B. Social Security number

Question 122

Mortgage Fraud:
Other Types Of Mortgage Fraud:
_______: When suspicious of the validity of a Social Security number provided in connection with an application for a mortgage loan, MLOs should continue the application and gather as much information on the borrower as possible. There are many services that investigate the validity of a Social Security number. If a fraudulent use of a Social Security number is discovered, it should be reported the _____, who investigates SSN theft, or the ______ if there are issues involving TAXES.

Answer 122

A. Identity Theft
B. Federal Trade Commission (FTC)
C. IRS Service

Question 123

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional SCRUTINY .
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by ITSELF may not be significant, however, MULTIPLE red flags may indicate an operating environment that is conducive to fraud, including:
• ______: Buyers may choose any lender they want for a purchase transaction. However, it is not unusual for real estate agents to recommend the use of a certain lending institution. Lenders often solicit loans through these real estate agents by forming alliances with them. If a transaction will close ONLY if a certain lender is used, ask questions because it is unlikely that only one lender would offer a buyer certain favorable terms. Unfortunately, in many mortgage fraud scams, the buyer is unsophisticated in seeking financing and may have credit issues that make lending more challenging. The buyer may be told this loan is the ONLY chance for a home purchase when that is NOT the case.

Answer 123

A. Steering Buyers to a Specific Lender

Question 124

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: Since the inception of ____ or _____, the documentation required for the loan may be LIMITED. These loans–rare in today’s market–allow the borrower to provide, without verification, employment history, income, and debt.
Be MORE suspicious if a borrower ONLY had to produce MINIMAL documentation to qualify for the loan.

Answer 124

A. Stated Income
B. no-doc or low-doc loans

Question 125

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: If a buyer is NOT required to pay a single _____ at closing, questions should be asked. What this means is the buyer has been able to get around down payment requirements, and the _____ is paying all the points and closing costs involved with the buyer’s loan. In theory, the SALES price may have been INFLATED to cover these costs which is ALLOWED.
Even with less stringent lending guidelines and requirements, it is unusual for a buyer to need NO money for a closing.

Answer 125

A. No Money Due at Closing
B. dollar
C. seller

Question 126

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: A HUGE red flag in a transaction is when the seller in the purchase contract is NOT the OWNER of record. There could be legitimate reasons for this, like the seller could be the buyer of the property via _____ or the seller could have recently purchased the property at a sheriff’s sale and will not gain title until ______ of the sale. Participants in the sale should ask why the seller is NOT the OWNER of record and ______ that the reason is legitimate.

Answer 126

A. Sale Subject to the Seller Acquiring Title
B. land contract
C. confirmation
D. verify

Question 127

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: The sales contract is supposed to guide the title agency or closing agent to the terms of the Closing Disclosure, and there should be NO discrepancies. Buyers have the right to review their Closing Disclosure _____ business days before closing. They should compare this document to the purchase contract and to the Loan Estimate received from the lender.

Answer 127

A. Difference in Sale Price
B. three (3) business days

Question 128

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: To carry out this scheme, an appraisal is ordered and completed showing a HIGHER than EXPECTED value. The appraiser is then contacted regarding alterations or addendums to the purchase contract, typically made after the lender is told the higher appraised amount. The new, altered contract now matches the higher appraisal value.
These schemes enable the seller and lender to profit more from the transaction because additional money was available through a HIGHER-than-expected appraisal.

Answer 128

A. Sale Price Changes to Fit Appraisal

Question 129

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: Certainly, there is no law against a mother selling her property to her son or daughter, even at a DISCOUNTED price. However, mortgage fraud scams OFTEN involve FAMILY members.
So, when the transaction is NOT an arm’s length transaction, FULL disclosure is imperative. Cases of mortgage fraud involving ENTIRE families have been reported. Many times, the ______ in a scam is a FAMILY member. Purchase contracts between family members should specifically STATE their relationships so it does not appear ______ hidden.

Answer 129

A. Related Parties Involved
B. straw buyer
C. intentionally

Question 130

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: In certain mortgage fraud schemes, unknown third parties who appear to have NO relationship to the transaction are PAID out of the funds received at the CLOSING. The implication, of course, is there may be debt NOT revealed in the closing statements. Once again, a closing statement that is NOT followed to the letter is a red flag to the _____. It may be prudent to have LEGAL representation to review all the closing paperwork before signing any documents.

Answer 130

A. Funds Paid to Undisclosed Third Parties
B. borrower

Question 131

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: The seller receives cash from the sale of the property; however, it is not stated in the Closing Disclosure or in the purchase contract. The motive, of course, is ______ profits. No PAPER TRAIL exists to show the payment.

Answer 131

A. Cash Paid to Seller Outside of Escrow
B. unstated

Question 132

Mortgage Fraud:
Red Flags of Mortgage Fraud:
A red flag is a situation that requires additional scrutiny.
According to the Federal Financial Institutions
Examination Council (FFIEC), one red flag by itself may not be significant, however, multiple red flags may indicate an operating environment that is conducive to fraud, including:
• ______: The borrower receives cash when purchasing the property. Usually, in these cases, the borrower does NOT have a down payment and the purchase contract calls for the _____ to pay ALL loan costs. Although seller-paid costs are becoming more TYPICAL in today’s economy, schemes in which the borrower receives CASH money from the transaction are NOT.

Answer 132

A. Cash Paid to Borrower
B. seller

Question 133

Mortgage Fraud:
Elder Abuse:
Another common example of mortgage fraud is when elderly homeowners are required to apply for and obtain mortgage loans they do not want. Oftentimes, a child or caregiver brings the elderly consumer to an application appointment for a home mortgage loan. If the senior homeowner appears confused or does NOT appear to be a ______ participant in the loan process, the other party may be using coercion, causing the elderly consumer to be under duress. If an MLO is presented with this situation, he should take the consumer’s application, but before actively proceeding with the loan request, a conversation should be conducted ______ with the senior borrower to determine if he is being forced to obtain a loan he does not want.

Answer 133

A. willing
B. one-on-one

Question 134

Mortgage Fraud:
Fraud Enforcement:
The ______ Act of 2009 or FERA, makes it a FELONY to falsify ____ documents submitted to a broad range of financial institutions, including mortgage lending businesses. It also includes any other person “that makes in whole or in part a federally-related mortgage loan.” The amendments assure that private mortgage brokers and companies are held ACCOUNTABLE under federal fraud laws.
Without these amendments, for example, the _____ statute would not extend beyond traditional banks and financial institutions.

Answer 134

A. Fraud Enforcement and Recovery Act of 2009 / FERA
B. Loan
C. financial institution bribery statute

Question 135

Mortgage Fraud:
Fraud Enforcement:
FBI and Suspicious Activity Reports:
The FBI tracks mortgage fraud through _______ filed by federally-insured financial institutions and others, and from reports from the Department of Housing and Urban Development’s Office of the ________.
One way you can participate in combating fraud and protecting your reputation is by staying current with the industry.
For example, _______ is a private subscription service that gives members access to a database of all fraud and suspected fraud cases as reported by its members and state and federal regulatory agencies, as well as the ACTIONS taken. The service allows those in the industry to check credentials of companies and individuals with whom they work.
NOTE:There are also many free websites that document various mortgage fraud Scams and the consequences to the participants. It would be a good practice to bookmark some of those sites and make a point of visiting them regularly.

Answer 135

A. Suspicious Activity Reports (SARs)
B. Inspector General
C. Mortgage Asset Research Institute (MARI)

Question 136

Mortgage Fraud:
Penalties for Mortgage Fraud:
The penalties for mortgage fraud, either buyer or industry insider fraud, are stated in 18 U.S. Code § 1344:
Whoever knowingly executes, or attempts to execute, a scheme or artifice:
(1) To defraud a financial institution; or
(2) To obtain any of the moneys funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $________ or imprisoned not more than _____ years, or BOTH.

Answer 136

A. $1,000,000
B. 30 years

Question 137

Predatory Lending:
Along with the advantages of _____ lending, which extends credit to people who might not otherwise qualify for a home mortgage, come some of the inevitable negative by-products-lenders taking advantage of borrowers. Predatory lending involves loans that take advantage of ill-informed or desperate consumers through excessively HIGH fees, MISREPRESENTED loan terms, FREQUENT refinancing that does NOT benefit the borrower, and other prohibited acts. Predatory lending targets borrowers with little knowledge of, or defense against, these practices.

Answer 137

A. subprime

Question 138

Predatory Lending:
New regulations require that complete and clear disclosures be made to borrowers and specifically PROHIBITS certain practices, including:
• Packing a loan with credit insurance and other EXTRA fees
• Extending credit to people with LITTLE or NO income and who have little chance of repaying the loan (the lender forecloses on the property and keeps the excess _____ to cover costs)
• ______ the lender’s own HIGH-cost loan with another FEE-rich loan in less than a ______ (unless a lender can show that the new loan benefits the borrower)

Answer 138

A. equity
B. Refinancing
C. Year

Question 139

Predatory Lending:
The motive for predatory lending is PROFIT. The goal of a predatory lender is to take the property or STRIP its equity, or to profit from the EXORBITANT fees charged.
Undoubtedly, the lender claims to help borrowers achieve the dream of homeownership. Predatory loans are approved without regard for the borrower’s ability to REPAY. Interest rates are HIGHER than the level of RISK justifies. And, lenders may bundle unrelated products-such as a _________ into the mortgage loan to further their profit.

Answer 139

A. life insurance policy

Question 140

Predatory Lending:
Predatory Lending Regulations:
TILA is implemented by the Bureau’s Regulation Z and and was originally enforced by the Board of Governors of the _______. Most notably, the Board’s 2010 Loan Originator Final Rule substantially restricted payments creating incentives for MLOs to STEER consumers to more expensive loans. Under this Rule, creditors may NOT base a loan originator’s compensation on the transaction’s terms or conditions, other than the mortgage LOAN amount.

Answer 140

A. Federal Reserve System

Question 141

Predatory Lending:
Predatory Lending Regulations:
Predatory Lending Title ____ of the _______ Act of 2010, designated as the Mortgage Reform and Anti-Predatory Lending Act, gave the CFPB authority to probibit MLOs from STEERING borrowers to any loan that the borrower lacks the ability to repay or that has predatory characteristics, such as equity STRIPPING , EXCESSIVE fees, or ABUSIVE terms.
The _______ Act Section ______ added TILA Section 129C(d), which generally PROHIBITS a creditor from financing any premiums or fees for credit insurance in connection with any residential mortgage loan or with any extension of credit under an _____ consumer credit plan secured by the consumer’s principal dwelling.

Answer 141

A. Title XIV of the Dodd-Frank Act of 2010
B. Dodd-Frank Act Section 1414
C. open-end

Question 142

Predatory Lending:
Predatory Lending Regulations:
The _______ Act Section ______ added TILA Section 129C(d), which generally prohibits a creditor from financing any premiums or fees for credit insurance in connection with any residential mortgage loan or with any extension of credit under an open-end consumer credit plan secured by the consumer’s principal dwelling. The prohibition:
• Applies to credit life, credit disability, credit unemployment, credit property insurance, and other similar products.
• Does NOT apply to credit insurance for which PREMIUMS or fees are calculated and paid in full on a MONTHLY basis.
• Does NOT apply to credit unemployment insurance for which the premiums are reasonable, the creditor receives NO compensation, and the premiums are paid pursuant to a ______ insurance contract and are NOT paid to the creditor’s affiliate.

Answer 142

A. Dodd-Frank Act Section 1414
B. separate

Question 143

Predatory Lending:
Subprime Lenders and
Predatory Lending:
Legitimate subprime lenders offer loans to low-income and risky borrowers and must charge HIGHER interest rates to accommodate the RISK. The higher-than-typical closing and processing fees allow them to take on that risk. Without these lenders, riskier borrowers could not tap into their home equity or even own a home. Subprime lenders may be mainstream lenders who also offer conventional loans to borrowers or mortgage brokers specializing in working with the
“______” or with borrowers who are unable or UNWILLING to meet other criteria-such as verification of income or assets–required for a conventional loan.
These lenders usually do NOT make _______-backed loans and, therefore, often operate outside of some federally-related loan guidelines.
While many instances of predatory lending involve subprime loans, not all subprime lenders are predatory lenders. It may be difficult for potential borrowers to discern who are legitimate subprime lenders.

Answer 143

A. credit impaired
B. government

Question 144

Predatory Lending:
Predatory Lending Regulations:
Excessive Fees:
Predatory lending costs the borrower in many ways.
Although it is understandable that a higher-risk borrower would pay higher interest rates than someone with good credit, predatory lenders may force borrowers to pay EVEN MORE than they would for a typical subprime transaction. If the terms are difficult to understand, the borrower may be paying EXORBITANT loan origination, settlement, and servicing fees.
• Total fees greater than _____% of the LOAN AMOUNT may be considered higher than normal and may be a RED FLAG for _____, multiple fees under a variety of names alleging services done on the borrower’s behalf.
• Exorbitant ______ penalties may lock borrowers into abusive loans that CANNOT be easily REFINANCED when credit scores improve. Prepayment penalties may be tens of thousands of dollars and be enforced for many years into the loan. The reason?
To DISCOURAGE _____ of the highly profitable loan.
In reality, the majority of lenders do NOT charge prepayment penalties or, if they do, only in the _____ years of the loan.

Answer 144

A. 4-5%
B. junk fees
C. prepayment
D. payoff
E. first

Question 145

Predatory Lending:
Predatory Lending Regulations: Documentation:
For many borrowers, particularly those who are uninformed, loan documents may be difficult to understand. Legal jargon, small print, and page after page of confusing documentation may be presented for immediate signature. Often, the pressure is on closing the loan transaction with no time allowed to read the documents carefully. What is the solution for the borrower? Borrowers should be advised to have an attorney, credit counselor, or other _____ to review all documents before signing.

Answer 145

A. expert

Question 146

Predatory Lending:
Predatory Lending Regulations:
Equity Skimming:
_____ involves lenders making loans knowing the borrowers will not be able to make the monthly payments and thus setting them up for foreclosure. The borrower loses everything–the home and the equity in it.
Some common types of equity skimming schemes include:
• _______: Borrowers typically rely on a lender’s advice regarding debt-to-income ratio, believing there are reasonable limits in place on what they can borrow. Equity skimming schemes may FALSIFY loan documents so the borrower does NOT realize the amount being borrowed is TOO much with a monthly payment amount that is TOO high. The lender makes the loan, knowing the borrower will NOT be able to make those monthly payments, setting them up for foreclosure. The borrower loses everything–the home and the equity in it.

Answer 146

A. Equity skimming
B. Loans Exceeding Ability to Repay.

Question 147

Predatory Lending:
Predatory Lending Regulations:
Equity Skimming:
Equity skimming involves lenders making loans knowing the borrowers will not be able to make the monthly payments and thus SETTING them up for FORECLOSURE. The borrower loses everything–the home and the equity in it. Some common types of equity skimming schemes include:
• ______: A contractor working in conjunction with a predatory lender recommends repairs to the home or property that may or may NOT actually need to be done. The quote for the work is typically extremely HIGH, and the contractor indicates arrangements for FINANCING are available. Enter the lender–offering a loan that will strip the equity out of the home, again resulting in possible foreclosure.

Answer 147

A. Home Improvement Scams

Question 148

Predatory Lending:
Predatory Lending Regulations:
Equity Skimming:
Equity skimming involves lenders making loans knowing the borrowers will not be able to make the monthly payments and thus setting them up for foreclosure. The borrower loses everything–the home and the equity in it. Some common types of equity skimming schemes include:
• ______: This involves refinancing _______, usually with minimal to NO NET tangible benefit to the borrower in terms of LOWERING the interest rate or saving fees. The borrower is promised cash out or benefits that NEVER materialize. Since the lender profits every time a loan is made, there is NO incentive for the lender to recommend otherwise.
Often, the refinancing RAISES the interest rate to the borrower.
With higher MONTHLY payments, the borrower may wind up defaulting on the loan, undergoing foreclosure, or being forced to refinance into even more unfavorable terms. Once again, the high-risk borrower takes a hit financially-a price he can ill afford to pay!

Answer 148

A. Loan Flipping
B. repeatedly

Question 149

Predatory Lending:
Predatory Lending Regulations:
Equity Skimming:
Equity skimming involves lenders making loans knowing the borrowers will not be able to make the monthly payments and thus setting them up for foreclosure. The borrower loses everything–the home and the equity in it. Some common types of equity skimming schemes include:
• ______: Some borrowers fall victim to extreme lending. Borrowers with EXTREMELY HIGH debt to income ratios are targets. With typical lending guidelines restricting borrowers to around _____% of income toward the mortgage payment, this extreme lending-_-often as much as ____% or more of income going toward the mortgage payment–puts borrowers at risk. If the borrower is laid off, loses a job, or experiences unanticipated expenses due to injury or illness, the risk for foreclosure is great.

Answer 149

A. Extreme Lending
B. 30%
C. 50%

Question 150

Predatory Lending:
Federal Trade Commission / FTC:
Foreclosure Rescue Scams:
The FTC warns borrowers about certain schemes regarding unscrupulous individuals trying to take advantage of homeowners facing foreclosure, including:
• ______: A scam artist tells homeowners that he can negotiate a deal with their lender to save their homes for an upfront fee.
Homeowners may be told NOT to contact their lenders, lawyers, or credit counselors and to let the scam artist handle all the details. Once the homeowners pay the fee, the scam artist takes off with their money.
Sometimes, the scam artist insists that homeowners make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.

Answer 150

A. Phony Counseling or Phantom Help

Question 151

Predatory Lending:
Federal Trade Commission / FTC:
Foreclosure Rescue Scams:
The FTC warns borrowers about certain schemes regarding unscrupulous individuals trying to take advantage of homeowners facing foreclosure, including:
• ______: Recall that bait and switch usually refers to an advertising tactic where a consumer is enticed with what sounds like a great deal, and then is sold something else either more expensive or somehow less advantageous to the consumer. Similarly, a rescue scam artist will provide borrowers with loan documents to sign to make their mortgage current. But buried in the stack of documents is one that surrenders title to the scammer
NOTE: To combat these schemes, the FTC issued Regulation ____, which contains provisions against advance fees prior to a written offer that is acceptable to the homeowner, who can reject the offer free of charge, added disclosures, and prohibited claims.

Answer 151

A. Bait and Switch Scheme
B. Regulation 0,

Question 152

Predatory Lending:
Federal Trade Commission / FTC:
Foreclosure Rescue Scams:
The FTC warns borrowers about certain schemes regarding unscrupulous individuals trying to take advantage of homeowners facing foreclosure, including:
• ______: A homeowner is told to SURRENDER the title as part of a deal that allows him to remain in the home as a renter with the intention of buying it BACK during the next few years. The schemer may tell the homeowner that surrendering the title will permit a different borrower with a better credit rating to secure NEE financing and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back the home becomes IMPOSSIBLE .
The homeowner loses the home, and the scam artist walks off with all or most of the home’s EQUITY. Worse yet, when the new borrower defaults on the loan, the original homeowner is ______ .
In a variation, the scam artist RAISES the RENT over time to the point that the former homeowner can’t AFFORD it. After missing several rent payments, the renter–the former homeowner–is evicted, leaving the “_____” free to sell the house.

Answer 152

A. Rent-to-Buy Scheme
B. Evicted
C. rescuer

Question 153

Predatory Lending:
Indicators of Predatory Lending:
Changing _____ at closing was historically one of the MOST COMMON predatory lending schemes.
Borrowers discovered that closing documents did not reflect the loan terms and fees originally stated in the Loan Estimate, and often felt as though they had no choice but to go through with the loan. A difference between the sale price on the Closing Disclosure and the price on the sales contract is a RED FLAG. Of course, it could be an honest mistake, but as the sales contract is supposed to guide the title agency or closing agent to the terms of the Closing Disclosure, there should be NO discrepancies.

Answer 153

A. loan terms

Question 154

Predatory Lending:
Indicators of Predatory Lending:
The _____ Rule introduced with the ______ amendments to TILA that requires an additional waiting period of _____business days after disclosing CHANGED loan terms helps to address this situation.
HUD identifies several other predatory schemes used by unscrupulous MLOs, including:
• Encouraging borrowers to LIE about their income, expenses, or cash available for down payments to get a loan.
• KNOWINGLY lending more money than a borrower can afford to repay.
• Charging high-interest rates to borrowers based on their race or national origin and NOT on their credit history.
• Charging fees for unnecessary or NON-EXISTENT products and services.
• PRESSURING borrowers to accept higher-risk loans such as BALLOON loans, INTEREST-ONLY payments, and STEEP prepayment penalties.
• Targeting vulnerable borrowers to _____ offers when they know borrowers need cash due to medical, unemployment, or debt problems.
• Stripping homeowners’ equity from their homes by convincing them to _____ again and again when there is no benefit to the borrower.

Answer 154

A. The 3/7/3 Rule
B. Mortgage Disclosure Improvement Act / MDIA
C. three business days
D. cash-out refinance
E. refinance

Question 155

Predatory Lending:
Indicators of Predatory Lending:
HUD indicates that borrowers should be aware of the following red flags that could indicate predatory tactics:
• Lenders tell borrowers that they are the borrower’s ONLY chance of getting a loan or owning a home.
Borrowers should be able to take their time to shop around and compare prices and houses.
• The house the borrower is buying costs ALOT more than other homes in the neighborhood but isn’t any bigger or better.
• Borrowers are asked to sign a sales contract or loan documents that are BLANK or that contain information which is FALSE.
• Borrowers are told that ______ protects them against property defects or loan fraud when it does NOT.
• The cost or loan terms at closing are NOT what the borrower AGREED to.
• Borrowers are told that refinancing can solve their CREDIT or MONEY problems.

Answer 155

A. FHA insurance

Question 156

Chapter Summary: Outlined laws are the minimum duty required of an MLO. However, MLOs should strive to fulfill not only the letter of the law but also its intent. There are many sources from which an MLO can obtain ethical guidance. The BBB and state attorney general’s office can provide guidance. The National Association of Mortgage Brokers (NAMB) has created and adopted a _______.

Answer 156

A. Code of Ethics.

Question 157

Chapter Summary: _____ advertising is an alluring but insincere offer to sell a product or service that the advertiser, in truth, does not intend or want to sell in order to switch consumers from buying the advertised merchandise. Every advertisement should be a bona fide offer to sell. An advertisement is a commercial message in any medium that promotes, directly or indirectly, a credit transaction.

Answer 157

A. Bait and switch

Question 158

Chapter Summary: Misrepresentation is simply false or misleading information that could include documents, misstatements, or omission. A material _____ is one that, if known, might have caused a reasonable consumer to make a different decision. The _____ Act states that advertisements must be truthful and nondeceptive, that advertisers must have evidence to back up their claims, and that advertisements cannot be unfair. An ad is unfair if it causes or is likely to cause substantial consumer injury, which a consumer could not reasonably avoid, and it is not outweighed by the benefit to consumers. An ad is deceptive if it contains a statement–or omits information–that is likely to mislead consumers acting reasonably under the circumstances and is material to a consumer’s decision to buy or use the product. The same laws that regulate print and broadcast media apply equally to advertising, promotion, and marketing on the Internet.

Answer 158

A. fact
B. FTC

Question 159

Chapter Summary: Treating everyone equally helps avoid violations of the Civil Rights Act of 1866 and Title VIII of the federal Fair Housing Act of 1968. It is illegal to discriminate based on race, color, religion, sex, national origin, disability, or familial status. _______ is illegally refusing to make loans on property located in a particular neighborhood for discriminatory reasons.

Answer 159

A. Redlining

Question 160

Chapter Summary: The ______ Act Regulation _____ helps enforce compliance of redlining by requiring certain lenders and mortgage brokers to file an annual report categorizing the ______ of loans made so cases of redlining can be spotted.
_____ are also discriminatory, especially if they have a disparate impact on a minority group. The courts can step in to remedy these situations. Advertising must also be fair and NEUTRAL in its language.

Answer 160

A. Home Mortgage Disclosure Act (HMDA) Regulation C
B. location
C. Exclusionary zoning laws

Question 161

Chapter Summary: The ______ Act Regulation _____ prohibits discrimination in granting credit to people based on sex, age (if at least 18), marital status, race, color, religion, national origin, receipt of public assistance, or exercised rights under the Consumer Credit Protection Act. A creditor has 30 days after the receipt of a “complete application” to provide a credit decision to the applicant. The Statement of Adverse Action must include specific reasons for the decision or inform the applicant of the right to request specific reasons for the decision within 60 days of a credit decision. Borrowers have a right to a copy of the appraisal report used in the decision process upon completion of the appraisal or no later than three business days before settlement.

Answer 161

A. Equal Credit Opportunity Act Regulation B

Question 162

Chapter Summary: ______ Act Regulation ____ regulates settlement and closing procedures and requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures. Among RESPA requirements is Section _____, which prohibits kickbacks and unearned fees.

Answer 162

A. RESPA / Real Estate Settlement Procedures Regulation X
B. RESPA / Real Estate Settlement Procedures Section 8

Question 163

Chapter Summary: Appraisers subscribe to a set of rules and guidelines known as _____. The appraiser is required by law and professional standards to act independently, impartially, and objectively when performing his work. An appraiser must never accept an assignment that requires him to “______” or bring the value in keeping with the client’s demands.

Answer 163

A. USPAP
B. hit a specific number

Question 164

Chapter Summary: ______ generally requires collusion between the seller, buyer, appraiser, and lender/broker. This scheme occurs when a property is purchased at a low price, appraised at an inflated value without any valid reason for the increase, and then resold at a much higher price.

Answer 164

A. Illegal property flipping

Question 165

Chapter Summary: This type of scheme involves refinancing repeatedly, usually with minimal to no net tangible benefit to the borrower in terms of lowering the interest rate or saving fees.

Answer 165

A. Loan flipping

Question 166

Chapter Summary: Being honest with everyone involves avoiding fraud, which is intentional misrepresentation or concealment of a material fact. Mortgage professionals must also steer clear of any situation that can be construed as mortgage fraud because it is a serious crime. The fraud can be perpetrated by borrowers who lie on applications, by an appraiser who provides an inflated property value, or by an MLO who ignores derogatory information to get a loan approved. Mortgage fraud also includes NOT reporting all items on the Closing Disclosure accurately, creating ____ documents for verification, or concealing the true nature of the borrower’s down payment.

Answer 166

A. phantom

Question 167

Chapter Summary: Predatory lending involves loans that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower, and other prohibited acts. Predatory lending targets borrowers with little knowledge of, or defense against, these practices. Laws such as the_____ and the ______ also known as Title ____ of the ______ Act of 2010) establish disclosure requirements and prohibit EQUITY STRIPPING and other abusive practices.

Answer 167

A. Mortgage Disclosure Improvement Act (MDIA)
B. Mortgage Reform and Anti-Predatory Lending Act
C. Title XIV
D. Dodd-Frank Act of 2010

Question 168

Ethical and Legal Considerations:
The standards of conduct for the mortgage industry are NOT a matter of law. There are NO statutes or regulations that _____ ethical behavior. The laws and regulations MERELY outline which specific acts are required or prohibited under the law. However, several professional associations do have standards and guidelines that they expect their members to adhere to.

Answer 168

A. codify

Question 169

Vocabulary: A commercial message in any medium that promotes, directly or indirectly, a credit transaction.

Answer 169

A. Advertisement

Question 170

Vocabulary: An offer made in good faith with no element
of fraud.

Answer 170

A. Bona Fide Offer

Question 171

Vocabulary: An independent government agency within the Federal Reserve System with rulemaking and enforcement authority over many consumer financial laws. The CFPB was established under Title ____ of the _____ Act.

Answer 171

A. Consumer Financial Protection Bureau (CFPB)
B. Title X
C. Dodd-Frank Act

Question 172

Vocabulary: A law that may be neutral on its face but has a discriminatory effect since it has a greater adverse impact on one group than on others.

Answer 172

A. Disparate Impact

Question 173

Vocabulary: Interest in the real estate of a deceased spouse given by law to the surviving partner.

Answer 173

A. Dower or Curtesy Rights

Question 174

Vocabulary: Laws that have the effect of denying housing to minorities or other protected classes.

Answer 174

A. Exclusionary Zoning Laws

Question 175

Vocabulary: Industry-insider fraud motivated by money:
Estimated at _____% of all reported fraud losses.

Answer 175

A. Fraud for Profit
B. 80%

Question 176

Vocabulary: Fraud committed by the borrower motivated by a desire to hold property; estimated at _____% of all reported fraud losses.

Answer 176

A. Fraud for Property
B. 20%

Question 177

Vocabulary: All types of crime in which someone wrongfully obtains and uses another person’s data in some way that involves fraud or deception, typically for economic gain.

Answer 177

A. Identity Theft

Question 178

Vocabulary: A fee or other compensation given for services not performed, but as a means of undisclosed commission for business referrals. These are prohibited by _____

Answer 178

A. Kickback
B. Real Estate Settlement Procedures Act / RESPA

Question 179

Vocabulary: A scheme in which some type of material misstatement, misrepresentation, or omission is relied upon by an underwriter or lender to fund, purchase, or secure a loan. These types of fraud schemes are usually fraud for _____ or fraud for _____.

Answer 179

A. Mortgage Fraud
B. profit
C. property

Question 180

Vocabulary: Any oral or written action directed to a person that has the effect of affirmatively influencing the selection of a settlement service or business provider.

Answer 180

A. Referral

Question 181

Vocabulary: A person who receives payment for the use of their name and credit history to apply for a loan, generally as part of a mortqage fraud scheme. Also called ____ or ____.

Answer 181

A. Straw Buyer
B. Straw Owner
C. Straw Purchaser

Question 182

Vocabulary: Data on mortgage fraud compiled by the FBl, which are filed by federally-insured financial institutions and from reports by the _____’s Office of the Inspector General.

Answer 182

A. Suspicious Activity Reports
(SAR)
B. Department of Housing and Urban Development