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MLO Licensing > Ethics > Flashcards

Ethics Flashcards

1
Q

You are working for the borrower, but you must protect your ________.

A

Company.

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2
Q

Fair Lending, Fair Housing and ECOA:

A

Everyone has the right to apply.

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3
Q

All of the borrower’s information must be kept confidential under:

A

Gramm, Leach, Bliley and the Safeguard Rules.

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4
Q

You must consider _____ _____, but you only have to count it if the assistance meets the program requirements for income.

A

Public Assistance

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5
Q

You DO / DO NOT have the right to change documentation to assist the borrower in meeting program guidelines.

A

Do NOT.

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6
Q

Redlining:

A

You cannot refuse to take an application, no matter the location of the property.

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7
Q

Reverse Redlining:

A

Charging more for interest rates and costs in a certain area, because of risk factors or the area itself.

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8
Q

Steering:

A

You cannot steer the borrower to live in a certain area or force them to take a specific program.

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9
Q

Can you get paid for referrals or receive kickbacks?

A

NO referrals or kickbacks can be paid for any reason.

All joint marketing is to be split 50-50.

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10
Q

If an appraiser is connected to anyone in the loan, the appraiser must be ______.

A

Replaced.

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11
Q

Can you talk or contact the appraiser?

A

You CANNOT talk to or contact the appraiser to influence value, threaten payment, or cut them off from any new business.

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12
Q

Whose responsibility is it to report loan files to your compliance officer if you feel the borrower is providing fraudulent information?

A

It is YOUR responsibility.

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13
Q

What can happen if you doctor any documents for the borrower?

A

You can be penalized or fired.

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14
Q

If you are offering a borrower a nontraditional loan, you must show them ________?

A

Examples of other loan products that you offer.

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15
Q

Any person that does one of the following is required to be licensed: (3 things)

A
  1. Takes or solicits loan applications.
  2. Negotiates terms.
  3. Expects compensation on the loan.
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16
Q

When is an Affiliated Business Disclosure required?

A

If an MLO is licensed as a Realtor and Loan Officer or if they or their family own as little as 1% of a third-party company.

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17
Q

Referral:

A

Anything of value being given or received from a third-party company, Realtor, or Builder.

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18
Q

Kickbacks ARE/ARE NOT allowed in receiving or paying on any transaction.

A

are NOT.

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19
Q

Fraud Checks - Asset Fraud:

A

Do your verifications match the documentation given to you by the borrower?

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20
Q

Fraud Checks - Sales Contract Red Flags:

A

Do the sellers on the contract match with the title owners listed on the Title Report?

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21
Q

Why must personal property be backed out of the sales price?

A

You can only borrow against real estate. Also, the appraiser cannot appraise personal property into the value.

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22
Q

Fraud Checks - Occupancy Fraud:

A

FHA requires the borrower to owner occupy for 60 days. Fannie, Freddie, USDA and VA require the borrower to occupy the property.

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23
Q

Fraud Checks - Income Fraud:

A

Do the verifications match the documentation provided by the borrower? You need to verify that overtime and bonuses are likely to continue.

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24
Q

Power of Attorney (POA)

A

Refers to who is given the right to use it and whether it is a limited or full POA. Any POA must be approved by your underwriter.

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25
Q

Advertisements - Bait and Switch:

A

Tactics like posting enticing rates to get the borrower to call you so you can try to switch them to another product.

Purpose is to switch consumers from buying advertised products to something else.

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26
Q

Do not use any language, words, or information that are _______ to the borrower or indicate to the borrower that they should not apply with you.

A

Detrimental.

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27
Q

What must be on any marketing piece, radio, TV or newspaper that contains a number?

A

Annual Percentage Rate (APR)

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28
Q

You must disclose all costs and terms of the loan on the ____.

A

LE (loan estimate)

29
Q

The LE and CE must be delivered to meet the required time frames under _____+_.

A

TRID

30
Q

Power of Attorney (POA) must be approved by the ___________ before it is allowed. This is one of the major causes of fraud.

A

Underwriter.

31
Q

What is the Fair Housing Act?

A

Protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities.

32
Q

Who does the FHA protect?

A

The Fair Housing Act prohibits discrimination in housing because of:

  • Race
  • Color
  • National Origin
  • Religion
  • Sex
  • Familial Status
  • Disability
33
Q

What does the Fair Housing Act cover? What, in very limited circumstances, does the act exempt?

A

The Fair Housing Act covers MOST housing.

Exempts, limited circumstances:

  • Owner occupied buildings with no more than 4 units
  • SFH sold or rented by the owner w/o use of an agent
  • Housing operated by religious organizations and private clubs that limit occupancy to members
34
Q

How does the Fair Housing Act regulate the Mortgage Industry? In Mortgage Lending, FHA states it is illegal to discriminate, as well as to: (8 items)

A
  • Refuse to make a mortgage loan or provide other financial assistance for a dwelling.
  • Refuse to provide information regarding loans.
  • Impose different terms or conditions on a loan, such as different interest rates, points, or fees.
  • Discriminate when appraising a dwelling.
  • Condition the availability of a loan on a persons response to harassment.
  • Refuse to purchase a loan.
  • Make sure your advertising complies with fair housing laws by focusing on the property and its amenities in your listing; NOT on who you think might be an ideal renter or buyer.
  • Do not make statements that exclude persons with protected characteristics or express a preference for one characteristic over others.
35
Q

How does the Fair Housing Act regulate advertising?

A
  • Always include the fair housing logo and/or the “Equal Housing Opportunity” slogan in your advertising.
  • Do not exclude persons with protected characteristics from your marketing campaign, such as families with children, people of certain racial or ethnic backgrounds, persons with disabilities, etc.
36
Q

What rule made it illegal to charge upfront fees and require disclosures in ads for mortgage assistance relief providers?

A

MARS.

These rules protect distressed borrowers from foreclosure rescue schemes.

37
Q

Can you originate for a family member?

A

Yes, there is nothing illegal or unethical about originating a loan for a family member.

38
Q

If the borrower plans on using a property as a second home and rental property, it needs to be considered what occupancy type?

A

Investment property.

39
Q

What is chunking?

A

The sale of properties at artificially inflated prices, pitched as investment opportunities to naïve real estate investors who are promised improbably high returns and loan risks.

40
Q

The servicer has multiple options if fraud is discovered on a loan. What happens most commonly?

A

The loan goes back to the originating entity to buyback and deal with the fraudulent loan.

41
Q

Can you invoice a customer for an appraisal if they back out at the last minute to get a lower rate from another lender?

A

Yes. It is legal for you to recoup third party fees that you’ve paid if the loan does not close because of the customer.

42
Q

Could you pay for a customers dinner celebrating closing a loan on a new home purchase?

A

Yes. If you are paying for their meal simply to celebrate their loan closing and not in anticipation or as a thank you for referrals they’ve made, it should not be a violation of RESPA Section 8.

43
Q

What is Double Selling?

A

Occurs when a mortgage loan originator accepts a legitimate application and related documentation from a borrower, reproduces or copies the loan file, and sends the loan package to separate warehouse lenders to each fund the same loan.

44
Q

What is negative amortization?

A

Occurs when a mortgage allows the borrower to make minimum payments that are less than the entire amount of interest owed, the unpaid interest is deferred by adding it to the loan balance. Also known as deferred interest.

45
Q

What is fraud for profit?

A

May involve a group of industry insiders attempting to defraud lenders for profit. Those who commit this type of mortgage fraud use their specialized knowledge or authority to commit or facilitate the fraud.

46
Q

What is the fine for violating Section 8 of RESPA?

A

Fine up to $10,000, up to 1 year in prison or both.

47
Q

What is churning?

A

Churning/Repeated Refinancing is excessive selling/lending activity to generate fees and commissions. In some cases, the lender steps the rate down through multiple refinances. Each refinance is only to a slightly lower rate until the pre-arranged rate is reached.

48
Q

A telemarketer, which includes a mortgage loan originator calling leads, who disregards the National Do Not Call Registry, could be fined up to $______ for each call.

A

$42,350

49
Q

Your NMLS number is also referred to as?

A

Unique Identifier

50
Q

Where would the NMLS/Unique Identifier appear?

A
  1. 1003
  2. Promissory Notes
  3. Mortgages
  4. Trust Deeds
51
Q

What are the 6 steps to getting your MLO license?

A
  1. Get a NMLS number (unique identifier)
  2. Complete 20hr NMLS Prelicense Course
  3. Schedule Exam (National exam with UST - uniform state test)
  4. Complete MU4 (individual application)
  5. Submit fingerprints (Live Scan)
  6. Pay for a credit report ($19)
52
Q

How many hours of Continuing Education must you complete each year?

A

8 hours

53
Q

After 3rd MLO test without passing the waiting period is how long?

A

6 months/180 days

54
Q

What is fraud?

A

Misrepresentation, concealment, or omission of material facts

55
Q

What is actual fraud?

A

Intent to deceive

56
Q

What is constructive fraud?

A

Unintentional, the result of carelessness or negligence

57
Q

What is mortgage fraud?

A

Any misrepresentation or concealment used in an attempt to obtain a mortgage loan

58
Q

What are the 2 categories of mortgage fraud?

A
  1. Fraud for property

2. Fraud for Profit

59
Q

What is fraud for property?

A

Consumer fraud - borrowers misrepresent information on loan applications to qualify, including but not limited to misrepresenting income and expenses, lying about the property being owner occupied vs tenant occupied, and lying about the source or amount of the down payment

60
Q

What is fraud for profit?

A

This type of fraud is a more sophisticated version of mortgage fraud because it involves real estate agents, appraisers, lenders, and closing agents or attorneys.

Some examples of fraud for profit include flipping, straw buyers, bogus sales, inflated appraisals, and air loans.

61
Q

What is an air loan?

A

Non-existent loans and no-collateral loans

62
Q

What is a deed scam?

A

Forged seller’s signature on the deed. Property is fraudulently transferred and deed recorded.

63
Q

What is a double sold loan?

A

Primary mortgage holder sells loan to fraudulent company for servicing. Borrower signs multiple copies of the same application or documents that the loan originator submits to different lenders.

64
Q

What is an unrecorded mortgage or silent second?

A

Buyer gives a seller a second mortgage without informing the lender or makes the lender aware but never intends to file the lien to make any payments to the seller, with the seller agreement.

65
Q

What is equity skimming?

A

Involves lenders making various types of loans knowing the borrowers will not be able to make the monthly payments and setting them up for foreclosure. The borrower loses everything - the home and the equity in it.

66
Q

What is loan flipping?

A

Refinancing over and over again, usually with minimal to no net tangible benefit to the borrower in terms of lowering the interest rate or saving fees

67
Q

What is a straw buyer?

A

A personal who makes a purchase on behalf of another person. A straw buyer is used when the real buyer cannot complete the transaction for some reason.

68
Q

What is a Switch After Sale?

A

Accepting a deposit for a product, then switching product to a higher-priced item.

Failure to make delivery of product within reasonable time or make refund.

69
Q

What is a Bona Fide Offer?

A

Refusal of advertiser to show, demonstrate or sell product offered.

Disparagement of advertised product.

Showing or demonstrating product that is defective, unusable or impractical for purposes represented.

MLO Licensing (11 decks)

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