Chapter 5 Quiz: Ethics, Fraud, Consumer Protection, and Fair Lending Flashcards
While the law sets minimum standards of behavior, ethics is:
a. what you can get away with
b. the international standard
c. what is right
d. faith-based standard of behavior
c. what is right (p. 87)
“Ethics is the application of the oldest rule for distinguishing right from wrong–The Golden Rule (Do unto others as you would have them do unto you).”
Fraud for Profit often involves:
a. multiple loans
b. elaborate schemes
c. collusion of industry professionals
d. all of the above
d. all of the above (p. 98)
“Fraud for Profit: often involves multiple loans, elaborate schemes, and the collusion of industry professionals who are often paid for their participation.”
collusion: secret or illegal cooperation or conspiracy, especially in order to deceive or cheat others
The Federal Fair Housing Act is enforced by:
a. the FDIC
b. the NAACP
c. HUD
d. the Department of Justice
c. HUD (p. 110)
“The Department of Housing and Urban Development (HUD) is responsible for enforcement of the Federal Fair Housing Act.”
-private individuals can file discrimination complaints with HUD (not limited to the person discriminated against)
Refusing to lend within a designated area or restricting the number, size, and type of loan within a designated area is called:
a. redlining
b. steering
c. blockbusting
d. prudent business practice
a. redlining (p. 110)
“Redlining is the refusal to lend within a designated area, restricting the number of loans within an area, or restricting the size and type of loans within a designated area.”
Under the Federal Fair Housing Act, the seven protected classes include:
a. national origin, color, religion, race, sex, status, handicap
b. sexual orientation, race, religion, age, sex, color, handicap
c. color, age, race, source of income, religion, handicap, sex
d. race, religion, color, sex, handicap, familial status, age
a. national origin, color, religion, race, sex, status, handicap (p. 111)
“It is illegal to discriminate against any person because of race, color, religion, sex, handicap, familial status, or national origin:
- in the sale or rental of housing or residential lots
- in advertising the sale or rental of housing
- in the financing of housing
- in the provision of real estate brokerage services
- in the appraisal of housing
- as well as blockbusting”
The Federal Act (credit opportunity) that mandates that upon written request, applicants are entitled to a free copy of their property appraisal no later than three business days before closing is the:
a. Civil Rights Act of 1968
b. Home Mortgage Disclosure Act (HMDA)
c. Equal Credit Opportunity Act (ECOA)
d. all of the above
c. Equal Credit Opportunity Act (ECOA) (p. 113)
“Consumers are entitled to receive a copy of an appraisal report that is used in conjunction with a loan application. The ECOA Valuations Rule requires creditors to disclose to applicants that they have the right to receive copies of appraisals and written valuations. This notice needs to be delivered THREE BUSINESS DAYS after the creditor receives an application.”
“The purpose of Equal Credit Opportunity Act (ECOA) is to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance and other information in a manner which is fair and equitable to the consumer, with regard to confidentiality, accuracy, relevancy, and proper utilization of such information.”
The Fair Credit Reporting Act provides that:
a. when credit is denied because of a report, the consumer will be notified and given the name of the consumer reporting agency
b. the consumer will be advised when an investigative consumer report is still in process
c. adverse information more than seven years old shall be removed from the report
d. all of the above
d. all of the above (p. 115)
“The purpose of Fair Credit Reporting Act (FCRA) is to give consumers rights as to who has access to their credit files, as well as to know what is in their files and the right to correct inaccurate credit information.”
a. permissible issuance of reports
b. right to know
c. errors
d. reinvestigation
e. obsolete information
f. investigative consumer reports
g. creditor’s duty
Failure of a mortgage broker or lender to properly display the Equal Housing Opportunity or Equal Housing Lender poster could result in:
a. a $10,000 fine
b. up to 6 months in jail
c. the shifting of the burden of proof in a discrimination claim to the broker or lender
d. none of the above
c. the shifting of the burden of proof in a discrimination claim to the broker or lender (p. 110)
“Should a personal claim that a loan brokers or lender discriminated against him or her under the Federal Fair Housing Law (redlining), the burden of proof could be shifted to the lender or loan broker if an Equal Housing Lender Poster is not displayed.”
According to HUD, a scheme in which a recently acquired property is sold for a considerable profit with an artificially inflated value, often as the result of collusion with an appraiser, is known as:
a. air lending
b. property flipping
c. short selling
d. double selling
b. property flipping (p. 100)
“Property flipping is a scheme in which a recently acquired property is resold for a considerable profit with an artificially inflated value, often as the result of collusion with an appraiser.”
The Federal Act that requires financial institutions to demonstrate that their deposit facilities serve the needs of the communities in which they do business is the:
a. Home Improvement Act of 1974
b. Community Reinvestment Act (CRA)
c. Home Mortgage Disclosure Act (HMDA)
d. all of the above
b. Community Reinvestment Act (CRA) (p. 112)
“Community Reinvestment Act is based upon the finding that financial institutions are required by law to demonstrate that their deposit facilities serve the needs and conveniences of the communities in which they do business.”
-the purpose of the act is to require federal supervisory agencies to use their authority to make certain such institutions meet the credit needs of their local communities
