Chapter 6

Question 1

Ethics

Answer 1

Moral principles that govern a persons behavior and conduct

Question 2

Morality

Answer 2

the principle concerning the distinction between right and wrong

Question 3

Transaction Fraud

Answer 3

The nature of the transaction is mirepresented.

Question 4

Identity Fraud

Answer 4

When an applicant’s identity and/or credit history is altered, stolen, or fabricated to obtain a mortgage.

Question 5

Occupancy Fraud

Answer 5

Mortgage applicants deliberately misrepresent their intended use of the property.

Question 6

Property Fraud

Answer 6

Information about the property or its value is intentionally misrepresented.

Question 7

Straw buyers

Answer 7

Individuals are used by fraudsters to obtain mortgages.

Question 8

Air Loan

Answer 8

A loan that has a straw or non-existent buyer, or a non-existent property. Based on something pulled out of thin air.

Question 9

Chunking

Answer 9

The sales of properties at artificially inflated prices are pitched as investment opportunities to naive real estate investors. Usually, promise improbably high returns and low risks.

Question 10

Buy and Bail

Answer 10

This occurs when a homeowner is current on their mortgage, but the value of their home has fallen below the amount owed (underwater) so they apply for a purchase money mortgage on another home. After the new property has been secured the borrower will allow the first home to go into foreclosure.

Question 11

Foreclosure Rescue Scheme

Answer 11

takes advantage of borrowers who are in the process of foreclosure or about to foreclose. Promises to help the borrower avoid foreclosure often take payment from the borrower, but the borrower never receives services and loses their home.

Question 12

Unauthorized Fees and Payout Characteristics

Answer 12

A type of foreclosure rescue scheme where an advance fee scheme is perpetrated by a foreclosure rescue specialist where fees or payouts that were not approved by the servicer agreeing to the short sales are reflected on the HUD-1 or Closing Disclosure.

Question 13

Mortgage Assistance Relief Rule (MARS) (Reg O)

Answer 13

Makes it illegal to charge upfront fees and requires specific disclosures in ads for mortgage assistance relief providers. These rules protect distressed borrowers from foreclosure rescue schemes.

Question 14

According to MARS what must a mortgage assistance relief provider clearly and prominently disclose?

Answer 14

-Total cost
-That they can stop using their services at any time
-That they are not associated with the government or the distressed borrower’s lender
-That the distressed borrower’s lender may not agree to change the terms of their mortgage

Question 15

MARS rule requires mortgage assistance relief providers to do what in regards to advising about paying the mortgage or communicating with the lender?

Answer 15

-If they advise someone not to pay his or her mortgage, they must disclose the negative consequences that could result
-It is prohibited to advise the borrower to stop communicating with their lender.

Question 16

Short sale

Answer 16

A means of selling the house for less than the outstanding mortgage on it. Homeowner initiates but the lender must sign off on it.

Question 17

Short sales fraud

Answer 17

This is when perpetrators profit by concealing parties to the transaction or contingent transactions or falsifying material information so the servicer cannot make an informed short sale decision.

Question 18

non-arm’s length short sale transaction

Answer 18

Occurs when the borrower has a direct relationship or business affiliation with the seller. in a short sell the buyer and seller are required to sign an arm’s length affidavit to protect against a family member buying the home at a reduced cost while allowing the borrower to remain living there.

Question 19

Loan Modification

Answer 19

A permanent restructuring of a mortgage. Typically allows the borrower to have more affordable payments.

Question 20

Loan Modification Scheme

Answer 20

A company claims they can assist homeowners facing delinquency or foreclosures and help them keep, stay in, or stay in longer their home.

Typically charge high upfront fees, fail to execute, and put the homeowner at a much higher risk of losing their home.