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Mortgage Loan Originator Exam > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What is the primary purpose of RESPA Section 8?

A

To eliminate kickbacks, referral fees, and unearned fees that unnecessarily increase settlement service costs.

Chapter 5, p. 168

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2
Q

What are the three elements of an illegal kickback under RESPA?

A

1) A thing of value, 2) an agreement or understanding, and 3) a referral.

Chapter 5, p. 169

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3
Q

What is considered a ‘thing of value’ under RESPA Section 8?

A

Includes monetary compensation, services, gifts, or anything benefiting a referral source.

Chapter 5, p. 169

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4
Q

Are charitable contributions exempt from RESPA’s rules on kickbacks?

A

No, charitable contributions are not exempt from scrutiny under RESPA.

Chapter 5, p. 169

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5
Q

What does Regulation Z prohibit in advertisements for closed-end loans?

A

Misleading claims, such as ‘fixed rates’ for adjustable loans or government endorsement claims.

Chapter 5, p. 175

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6
Q

What are the protected classes under ECOA and the FH Act?

A

Race, color, religion, national origin, sex, marital status, familial status, age, disability, and receipt of public assistance.

Chapter 5, p. 172

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7
Q

What is overt evidence of discrimination?

A

When a lender explicitly discriminates or expresses discriminatory preferences.

Chapter 5, p. 172

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8
Q

What is disparate treatment in lending?

A

When a lender treats applicants differently based on prohibited factors, regardless of intent.

Chapter 5, p. 172

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9
Q

What is disparate impact?

A

When a neutral policy disproportionately affects a protected group without justification.

Chapter 5, p. 173

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10
Q

What is redlining?

A

The illegal practice of denying or limiting credit in certain neighborhoods based on prohibited factors like race or national origin.

Chapter 5, p. 173

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11
Q

What are the penalties for violating RESPA Section 8?

A

Fines up to $10,000, one year in prison, or both, per violation.

Chapter 5, p. 168

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12
Q

What does the Fraud Enforcement and Recovery Act (FERA) of 2009 do?

A

Expands federal authority to prosecute mortgage fraud with penalties up to 30 years in prison or $1 million in fines.

Chapter 5, p. 177

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13
Q

What is churning in mortgage fraud?

A

Excessive refinancing activity to generate fees and commissions without benefiting the borrower.

Chapter 5, p. 176

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14
Q

What is chunking in mortgage fraud?

A

Convincing a borrower to invest in multiple properties without their knowledge of multiple loans being taken out.

Chapter 5, p. 176

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15
Q

What is a straw buyer?

A

A person used to purchase a property on behalf of someone else to hide the true buyer’s identity.

Chapter 5, p. 176

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16
Q

What is equity theft?

A

Fraudsters forge documents to obtain loans on a property, leaving the homeowner unaware until foreclosure occurs.

Chapter 5, p. 176

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17
Q

What is a foreclosure rescue scam?

A

Fraudsters deceive homeowners into signing over their property with false promises to avoid foreclosure.

Chapter 5, p. 176

18
Q

What are the signs of mortgage fraud in loan applications?

A

Unrealistic commutes, inconsistent borrower information, and unusual down payment sources.

Chapter 5, p. 177

19
Q

What are red flags in credit reports for mortgage fraud?

A

No credit history, recent Social Security numbers, and liabilities not disclosed on the loan application.

Chapter 5, p. 177

20
Q

What are signs of fraud in employment verification?

A

Handwritten pay stubs, employer addresses matching borrower addresses, or unrealistic YTD earnings.

Chapter 5, p. 177

21
Q

What is the definition of fraud for housing?

A

Misrepresentation by a borrower to qualify for a loan, intending to make payments but falsifying information.

Chapter 5, p. 175

22
Q

What is fraud for profit?

A

Fraud involving elaborate schemes to gain illicit proceeds, often through misrepresentation in appraisals or loan documents.

Chapter 5, p. 175

23
Q

What is Regulation Z’s restriction on misleading use of the term ‘counselor’?

A

Advertisements cannot imply the lender is a counselor unless they are accredited in that role.

Chapter 5, p. 175

24
Q

How does Regulation Z address misleading government endorsements?

A

Prohibits claiming products are government-endorsed if they are not.

Chapter 5, p. 175

25
Q

What is prohibited in foreign-language advertisements under Regulation Z?

A

Providing promotional details in a foreign language while required disclosures are in English only.

Chapter 5, p. 175

26
Q

What is the Equal Credit Opportunity Act (ECOA)?

A

A law prohibiting discrimination in credit transactions based on protected classes like race, age, or marital status.

Chapter 5, p. 172

27
Q

What is the Fair Housing Act (FHA)?

A

A law prohibiting discrimination in residential real estate transactions, including lending and appraisals.

Chapter 5, p. 172

28
Q

What is a deceptive act in mortgage advertising?

A

Misrepresenting loan terms, rates, or lender affiliations to mislead consumers.

Chapter 5, p. 175

29
Q

What is stated income/stated asset abuse?

A

Misrepresentation of income or assets to qualify borrowers for loans they cannot afford.

Chapter 5, p. 176

30
Q

What is the role of the CFPB in enforcing lending ethics?

A

Oversees compliance with regulations like RESPA, ECOA, and TILA to protect consumers.

Chapter 5, p. 171

31
Q

What are mortgage brokers prohibited from doing under RESPA?

A

Splitting fees, accepting kickbacks, or charging for unearned services.

Chapter 5, p. 168

32
Q

What is the penalty for lenders practicing redlining?

A

Violations can result in lawsuits, fines, and regulatory actions for discriminatory lending.

Chapter 5, p. 173

33
Q

What are RESPA-permitted compensations?

A

Payments for actual services performed, such as title issuance or loan origination.

Chapter 5, p. 169

34
Q

What is the Fraud Enforcement and Recovery Act’s (FERA) statute of limitations?

A

Ten years for mortgage fraud prosecution.

Chapter 5, p. 177

35
Q

What is the purpose of Regulation Z?

A

Ensures transparency and fairness in mortgage loan advertisements and disclosures.

Chapter 5, p. 175

36
Q

What is mortgage property flipping fraud?

A

Quickly reselling properties for inflated prices based on false appraisals to generate profits.

Chapter 5, p. 176

37
Q

What are loan origination red flags for fraud?

A

Significant changes in loan applications, unrealistic commutes, and large unexplained cash payments.

Chapter 5, p. 177

38
Q

What is Regulation Z’s restriction on claims of debt elimination?

A

Advertisements cannot falsely claim loans eliminate debt unless they replace existing debt.

Chapter 5, p. 175

39
Q

What is the role of the Interagency Fair Lending Task Force?

A

Provides guidance to ensure lenders prevent discrimination and comply with fair lending laws.

Chapter 5, p. 171

40
Q

What is the ECOA’s requirement for adverse action notices?

A

Lenders must provide reasons for denying credit applications within 30 days.

Chapter 5, p. 172

Mortgage Loan Originator Exam (5 decks)

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