ETHICS

Question 1

812. The FBI investigates mortgage fraud in two distinct areas:

Answer 1

fraud for profit and fraud for housing.

Question 2

813. Illegal property flipping is best described as

Answer 2

purchasing properties and artificially inflating their value through false appraisals.

Question 3

814. Predatory lending typically affects senior citizens, lower income borrowers and applicants with low credit scores. Predatory lending forces borrowers to

Answer 3

Predatory lending forces borrowers to pay exorbitant loan origination/settlement fees, subprime or higher interest rates, and in some cases, unreasonable service fees.

Question 4

815. A builder-bailout scheme can occur when

Answer 4

a builder or developer experiences difficulty selling his inventory and resorts to using fraudulent means to unload properties

Question 5

816. Short sale fraud schemes occur when

Answer 5

the perpetrator uses a straw buyer to purchase and ultimately default on a home loan, creating a short sale situation so that the perpetrator can take advantage and purchase the home at a discount.

Question 6

817. An additional appraisal may be required if

Answer 6

if a prospective purchase is a “flipped” home with a higher-priced mortgage loan.

(Flips are defined as resells within 90 days with buyer paying a minimum 10 percent price increase or resells within the past91-180 days with buyer paying a minimum 20 percent price increase. )

Question 7

818. Air loan –

Answer 7

non-existent loans and no-collateral loans.

Question 8

819. Deed scam –

Answer 8

forged seller’s signature on the deed. Property is fraudulently transferred, and deed recorded. Thief mortgages property for cash-out and walks away.

Question 9

820. Unrecorded or silent second –

Answer 9

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

Question 10

821. Loan flipping –

Answer 10

an abusive practice in which a loan is refinanced without any tangible net benefit to the borrower. A form of equity stripping.

Question 11

822. Occupancy Fraud –

Answer 11

is related to the applicant lying about the home being owner occupied. An owner-occupied home can often get a lower interest rate than investment properties.

Question 12

823. Bait and Switch –

Answer 12

an alluring but insincere offer to sell product or service. Purpose is to switch consumers from buying advertised product to something else. It’s still bait and switch if consumer chooses other product/service.

Question 13

824. Switch after Sale -

Answer 13

accepting a deposit for product, then switching product to a higher priced item. Failure to make delivery of product within reasonable time or make refund. Delivery of the advertised product, which is defective, unusable, or impractical for the purpose represented or implied in the advertisement.

Question 14

825. Straw buyer –

Answer 14

A straw buyer is a person who makes a purchase on behalf of an other person. The borrower uses someone’s name (and credit) to purchase the property.

Question 15

826. Illegal Flipping occurs when a property is purchased at a low price, appraised at an inflated value without any valid reason for the increase, and then

Answer 15

resold at a much higher price

Question 16

827. Skimming A form of

Answer 16

identity theft involving compromising credit card readers to clone bank and credit cards.

Question 17

828. Equity Skimming –

Answer 17

offering to assist homeowners facing foreclosure through buying their home and then selling it back to them, usually at rates and terms guaranteed to result in default and loss of all equity, or they refinance the home, take out all the equity, then try to sell it back to the borrower, who cannot afford the new home price.

Question 18

829. Spamming A form of identity theft involving sending unsolicited

Answer 18

e-mails designed to trick recipients into providing personal information.

Question 19

830. Hacking A form of

Answer 19

identity theft involving accessing computer systems and networks to steal information.

Question 20

831. Identity Theft All types of crime in which someone

Answer 20

wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.

Question 21

832. FHA imposes restrictions requiring the borrower not to

Answer 21

not to resale the property for the first 90 days.

Question 22

833. FHA requires the lender to

Answer 22

investigate the transfer history of property for the past three years before resale, to identify potential flipping schemes.

Question 23

834. Elder Abuse when elderly homeowners are required to apply for and obtain mortgage loans that they do not want. Oftentimes, a child or caregiver forces this upon them. If an MLO is presented with this situation, he should

Answer 23

take the consumer’s application, but before actively proceeding with the loan request, try to conduct a one-on-one conversation with the senior to determine if he is being forced to obtain the loan.

Question 24

835. Predatory lending involves loans that take advantage of ill-informed consumers through

Answer 24

through excessive high fees, misrepresented loan terms, frequent refinancing and prohibited acts.

Question 25

836. The terms “predatory lending” with “mortgage fraud” – the two are NOT synonymous (although both can be present in the same transaction).

Answer 25

Predatory lending refers to a wide range of unethical behaviors and abusive practices that can leave borrowers unable to pay the loan they have received and/or unnecessarily take away the equity in their home.

Question 26

837. Material misrepresentation is the

Answer 26

the intentional hiding or altering of a material fact such as income or tax documents.

Question 27

838. Material misstatements are

Answer 27

are untrue statements related to financial status

Question 28

839. Omission is the

Answer 28

the intentional leaving out of information.

Question 29

840. Suspicious Activity Reports (SARs) are

Answer 29

filed with FBI by financial institutions suspecting or knowing of fraud.

Question 30

841. Mortgage Asset Research Institute (MARI) is a

Answer 30

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 action taken.

Question 31

842. Transitional Authority -

Answer 31

The SAFE Act was amended in 2018 with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 to mandate that all states implement transitional authority to MLOs seeking to become licensed in other states or who seek to move from a bank to a nonbank lender.

Question 32

843. These individuals are allowed to originate loans while completing any state specific requirements for licensure such as education or testing for up to 120 days while they are applying to the state agency for their new license

Answer 32

Transitional Authority Licensees

Question 33

844. Whoever knowingly executes, or attempts to execute, a scheme or artifice shall be fined

Answer 33

not more than $1,000,000 (One Million) or imprisoned not more than 30 years, OR BOTH