Ethics Flashcards
Mortgage broker Dave knew that his customer worked at a factory that was two weeks away from closing, but in his eagerness to close the deal, he decided to ignore that fact. This might be considered an example of
actual fraud.
What is the primary purpose of the Fair and Accurate Credit Transactions Act?
protect consumers from identity theft
In compliance with the Fannie Mae Selling Guide, which statement is FALSE as it relates to the persons who must sign a security instrument?
Only persons who have an ownership interest in the security property and also have his/her income used in qualifying for the mortgage must sign.
Mortgage loan processor Lisa distributes a company business card with her name on it along with the unique identifier of the mortgage lender she works for. Lisa hand writes a message on the card that states, “I can help you get a loan.” Lisa is
committing a prohibited act of misrepresentation in advertising which is a violation.
Alexa’s loan applicant calls her late in the evening before the closing, informing her he is being laid off the following Monday. All the loan papers are at the title company and the Closing Disclosure is approved. The buyer still wants the home. Alexa decides to let the loan close. What type of fraud is this?
material omission
To provide a revised Loan Estimate that can be used in determining good faith, a changed circumstance can be any of the following EXCEPT
the MLO neglected to inform the borrower and include the additional cost necessitated by a review appraisal.
For conventional lending, MLO Mandy can tell applicant Aiden that a gift can be provided by any of the following EXCEPT a(n)
real estate salesperson affiliated with the transaction.
If expired mortgage loan files for borrowers are disposed of in a dumpster at the back of the company’s office, the company has violated the consumer-protection requirements set forth by
FACTA.
A consumer reporting agency (CRA) must disclose to the consumer the recipients of a consumer’s credit report which it has furnished for a purpose other than for employment within the _____-month period preceding the request.
6
The Fannie Mae Selling Guide sets forth requirements for the use of a power of attorney (POA) in obtaining required signatures on a security instrument. Which of the following does NOT accurately reflect a requirement for the use of a POA in most circumstances involved with security instrument signatures?
A lender, who is not a relative of the borrower, may be used as the POA signer on a security instrument.
As set forth by the Telemarketing Sales Rule, when required advertising disclosures are oral, clear, and conspicuous means all of the following EXCEPT
Within a reasonable time frame
As mortgage broker Sam puts together an ad to attract some new customers, he should follow the requirements of what law to ensure his ad is not misleading or deceptive?
TILA
Mortgage broker Helen places an ad indicating a 5% interest rate for qualified applicants. Marshall meets the criteria to qualify at that rate, but Helen talks him into a less appropriate product, which results in a higher fee for her. This is an example of what sort of prohibited advertising tactic?
Bait and switch
MLO Brady failed to disclose a loan’s prepayment penalty to a consumer in a local publication. This BEST describes an example of
Misleading advertising
Mortgage companies need to establish internal policies that comply with the Telemarketing Sales Rule. Internal compliance policy can allow an MLO to call a consumer that makes an inquiry or submits an application to the company for up to ____ month(s) from the inquiry/application date.
3
Broker Tom advertises low interest rates and includes the accurate APR. However, when qualified applicants come in, Tom tells them that the smarter loan for them would be one with a slightly higher rate and more fees. If the loan does not offer more benefits than the one advertised, did Tom do anything wrong?
Yes, Tom could be accused of using a bait and switch tactic to earn more
Mortgage companies need to establish internal policies that comply with the Telemarketing Sales Rule. If a customer’s name is on the National Do Not Call Registry and that customer closes a loan with the company, the company must stop contacting the customer to solicit new business
After 18 months
A claim in any medium that gives the consumer an incorrect understanding of the service or product he is interested in obtaining BEST defines the term
Misleading advertising
The unlawful act of steering is
Channeling buyers to or away from certain neighborhoods based on their race or ethnic background
According to the Fair Housing Act, the Equal Housing Opportunity logo must be used in all advertising of
Residential real estate for sale, rent, or financing
The Fair Housing Act requires what to be posted in all institutions where mortgage loans are made?
Equal Housing Opportunity house logo
The Fair Housing Act requires the use of what slogan by creditors in all broadcast advertising?
Equal housing lender
When a lender’s advertisement offers a certain product, service, or loan, the product, service or loan must be made available
To a reasonable amount of qualified applicants
A for-profit MLO who claims to be a “counselor” in an ad about loan modification is in violation of what law?
Truth in Lending Act
Bait-and-switch advertising is BEST described as advertising
A “No points” loan to entice borrowers but not having the intention of actually offering it
The Fair Housing Act does NOT require that the Equal Housing Opportunity logo be displayed on
The Closing Disclosure
XYZ Mortgage Company makes a loan to Jaya knowing that she is unlikely to be able to repay it and anticipating that they’ll eventually foreclose and obtain some equity. This is an example of
Predatory lending
Cory is planning to purchase his first home and his real estate agent said that he must use a specific lender or else face having his loan denied due to his shaky credit record. Is this a legal practice?
No, it is illegal to steer a buyer to a lender with the impression that using the lender is required
When a Loan Estimate is provided to a borrower, it will be considered to have been provided in good faith if the actual closing costs are lower as shown on the borrower’s
Closing Disclosure
______ is the making of loans that take advantage of poorly informed consumers through excessively high fees, misrepresentation of loan terms, and frequent refinancing that does not benefit the borrower.
Predatory lending
If a consumer feels she has been discriminated against based on membership in a protected class under the Equal Credit Opportunity Act, she can go to the _____ to file a complaint.
CFPB or appropriate state civil agency as directed
Mortgage broker Bran is working with customer Arya. Bran recommends that she get a thorough home inspection and recommends Winter Inspections. Do you think that Bran can ethically and legally accept a $50 referral fee from Winter Inspections if Arya hires them?
No, a mortgage broker can never accept a fee or rebate for unearned settlement expenditures by his customer
The Fresh Start Company is anxious to work with homeowner, Julia, to obtain a loan modification that will help her avoid foreclosure. Fresh Start asks Julia for an advance fee to start the process. Fresh Start has violated the _____ with this advance fees request.
MARS Rule
As protection against predatory lending practices, the Home Ownership and Equity Protection Act places limitations on ______that may lock consumers into loans that may not be, or are no longer, in their best interest.
Prepayment penalties
For a Loan Estimate to be seen as provided in good faith, what cost cannot change from the Loan Estimate to the Closing Disclosure?
Application fee paid to lender
If a consumer feels he has been discriminated against under the Fair Housing Act, he has ____ year to go to ____ to file a complaint.
1 year, Department of Housing and Urban Development
Which is an example of steering?
Property manager Teri suggests Tim would be happier in a more diverse community
To comply with Regulation Z, lenders have an ethical and legal responsibility to disclose the ______ on the Loan Estimate.
Annual percentage rate
Fair lending and housing laws set forth requirements that ensure lenders treat applicants fairly and equally. Under laws related to fair lending and fair housing, which is legal?
Disregarding income that cannot be verified
Which is LEAST likely to be an indicator of predatory lending?
Requiring mortgage insurance
Sue faces possible foreclosure and contacts a mortgage lender whose ad promises to save her home for her. At closing, Sue sees that the lender changed the terms of the loan that they had agreed to, but she felt she had no choice but to go ahead with the loan or lose her house. This is an example of
Predatory lending
According to the Interagency Guidance on Nontraditional Mortgage Products, inducing a borrower to repeatedly refinance a loan in order to charge points and fees, although a net tangible benefit could have been achieved in a single transaction is an example of predatory lending. This predatory practice is commonly known as illegal
Loan flipping
As set forth by the FCRA, creditors who furnish information about consumers to consumer reporting agencies must correct, delete, or verify information within ____ days of receipt of a dispute.
30
Before an MLO can send documents to a customer electronically, permission must be obtained by the customer. Which of the following is the MOST acceptable method/s for obtaining consent and confirmation that a customer can access electronic documents?
By the electronic method for which the consumer will access documents
Mortgage companies are required to report any attempted fraud that occurs within their organization. Attempted fraud is reported by submitting a ______ to the Federal Financial Institution Examination Council (FFIEC). These reports are then reviewed and the information is reported to the institution’s regulator.
Suspicious Activity Report (SAR)
The compliance officer at a mortgage company must file a SAR when he observes electronic funds transfer transactions aggregating _____ or more that involve potential money laundering or violations of the Bank Secrecy Act.
$5,000
Vincent Collins is head of The Family Mortgage Corp. Two of his sons, Michael and Sonny work for the business as licensed mortgage loan originators. His third son, Fred, is not licensed and processes loans for the business. Which of the following would be illegal for Fred to do?
Advise a borrower who applied for a loan to get a fixed rate loan rather than an ARM
Which of the following must NOT specifically be considered as part of the underwriting analysis for a mortgage loan?
What is the history of the performance of properties sold in this geographic area
A consumer wants to file a complaint against XYZ Mortgage Company specific to the inaccuracy of fees provided via the Loan Estimate and Closing Disclosure. With what federal entity could this complaint be filed?
Consumer Financial Protection Bureau
If a consumer thinks his identity has been stolen, he may want to place a temporary freeze on his credit report. What is the maximum fee that a CRA may charge a consumer for placing a freeze on the consumer’s credit file?
$0
A consumer reporting agency that receives a request accompanied by proper identification must place a security freeze on the consumer credit report no later than ______ business day(s) after receiving such request.
1
MLO Portia takes an application for an owner-occupied property. Soon thereafter, she discovers that the borrower’s actual intention is for the property to be a rental property. What is the BEST action for Portia to take?
She should talk to her manager and the underwriter about what she’s discovered
Emily, the real estate agent in a purchase transaction, tells the MLO arranging financing, in confidence, that her seller has agreed to hold a fixed-rate second mortgage (to be filed after the closing) as a portion of the purchase price, which was not disclosed in the mortgage application. Knowing this information now, what is the BEST course of action for the MLO?
Refuse to process the loan
Which of the following does NOT accurately reflect a requirement set forth by FACTA for companies to properly secure or dispose of confidential customer information?
Companies must not maintain loan documents via electronic storage methods
Which of the following is not a permissible purpose for requesting a consumer report from a consumer reporting agency?
Medical transaction involving the consumer
When an MLO is printing a receipt for a consumer’s credit card or debit card number, FACTA requires that no more than ____ digits of any customer’s card or debit card number appear on the receipt.
5
Under Regulation Z, what advertisement is NOT permissible without additional disclosure information?
Loans at 5% interest rate
When the word “fixed” is used in an advertisement for an adjustable-rate mortgage, what is one requirement that must be met to ensure the ad is not considered misleading or deceptive?
The word “fixed” must be accompainied by the fixed time period
What sources of income CANNOT be used when qualifying a borrower for a mortgage loan?
Sporadic overtime and bonuses
Any solicitation done via e-mail must include instructions for
Opting out of receiving future e-mails
Which of the following income source can a lender NOT use as part of the income calculation used for loan qualification?
Income from a raise expected within a year
Each of the following sources of income must legally and ethically be used as part of the income calculation used for mortgage loan qualification EXCEPT
Child support that ends in a year
Gavin calls to ask about an advertised mortgage loan offer. How does TILA require that MLO Candice quote an interest rate to Gavin to ensure the quote is not misleading or deceptive?
She must quote the APR as well as the interest rate
When an underwriter evaluates assets, he is specifically interested in identifying if there are sufficient liquid assets to make the cash down payment and pay the closing costs and other expenses incidental to the purchase of the property. Typically the source of a borrower’s down payment can NOT be
Borrowed funds
The Closing Disclosure includes several required loan disclosures. Which of the following is NOT one of the loan disclosures that a lender provides on a Closing Disclosure?
Right of lender to change the loan interest rate
If the final APR at settlement deviates by more than ______ from the initial APR on the preliminary Closing Disclosure on an adjustable-rate mortgage loan, an additional waiting period is triggered.
1/4%
Which mortgage broker’s act is a violation?
Dorian collects a rate lock in fee from a client payable to the broker
A licensed MLO who terminates his affiliation with an employing mortgage broker but wishes to resume working as a mortgage loan originator in the near future may NOT
Originate loans during the time he is not affiliated with an employing entity
The prohibited act of redlining is defined as
Refusing to make or limiting loans on property in certain neighborhoods for discriminatory reasons
A mortgage lending company refuses to make loans for homes in a minority neighborhood. This is an illegal action called
Redlining
A real estate agent believes that his Hispanic client would probably prefer to live in a more diverse neighborhood and so he only shows her homes where there is a higher concentration of residents from Guatemala. This agent is guilty of
Steering
Which mortgage industry insider is least likely to be involved in a fraud scheme using inflated property values?
Title company officer
Jane completed an application for a home loan at XYZ Mortgage Company. She provided XYZ with bank statements, pay stubs, tax returns, and a current mortgage statement. XYZ also pulled her credit report. Which of these items in Jane’s loan file is NOT likely to fall under the information sharing restrictions of the GLB Act?
Sales price of her current house
Which industry insider would be the one most likely to file a falsified deed?
Government worker
An advertiser must provide proof that an interest rate in an advertisement was, in fact, available. All the following are acceptable to a regulator requesting proof EXCEPT a
Competitor’s rate sheet or ad showing the advertised rate
Betty is a loan processor for ABC Mortgage Corp. and is not licensed as a loan originator. Which of the following activities is illegal for her to engage in?
Advising a borrower about which loan program is most appropriate
As set forth by the Gramm-Leach-Bliley Act, _____ is/are NOT nonpublic personal information and, therefore, do not fall under the restrictions of when and under what circumstances the information may be disclosed to affiliates and nonaffiliated third parties.
Recorded mortgages
Unintentional breach of a legal duty is considered
Negligence
Whose signature is most commonly forged in a deed scam?
Seller
Which activity is an administrative/clerical task that can be ethically and legally performed without an MLO license?
Receive collect, and/or distribute information common for the processing or underwriting of a loan
Drew, a licensed MLO, receives a call from a potential borrower. Which of the following IS a topic for which Drew can provide the caller advice?
Drew can give advice on potential loan options to a consumer concerned with blemishes on his credit
If an appraiser intentionally underestimates an appraisal value to keep the values in that area low, that appraisal would be violating provisions of what law?
Truth in lending act
Anderson Mortgage Company has decided to outsource its loan processing activities to Total Processing, Inc. Pursuant to their agreement, Anderson pays Total $300 per file when the loan closes and nothing for files that do not close. Has Anderson committed a prohibited act that is a violation of RESPA?
No, it is not a violation of RESPA to pay someone for services performed
Ethically and by law, lenders must not be involved in the prohibited act of exchanging items of value for the referral of business to or from a settlement service provider. Which federal legislation prohibits the illegal exchange of kickbacks and referral fees?
RESPA
Which is least likely to be an indication that the prohibited act of property flipping may be taking place?
Purchasing and remodeling a house and selling it for quick profit
What mortgage broker’s act is prohibited?
Broker Dora collects a rate lock in fee from a client payable to the broker
Federal and state laws prohibit licensed MLOs from certain acts. Which of the following is NOT one of these prohibited acts?
MLO Hawkeye disburses the mortgage loan proceeds into a customer’s account via direct deposit
The Loan Originator Compensation Rule, as implemented by Regulation Z (Section 36), sets forth that a mortgage broker is prohibited from compensating an employed MLO based on
Loan program type
Section 36 of Regulation Z sets forth requirements for compensating MLOs. As set forth in Regulation Z, which is a prohibited compensation act?
An MLO receives compensation from a mortgage banker based on the loan type
Inducing owners to sell homes by suggesting the neighborhood’s ethnic or racial composition is changing, with the implication that property values will decline, is a prohibited act called
Blockbusting
Ted, a mortgage broker, convinces Alice to refinance her home again, promising her a lower interest rate. Afterward, Alice realizes no benefit. In fact, her interest rate went up. This is an example of the prohibited and illegal act of
Loan flipping
Becky, a mortgage broker, referred her client to A&A Title, a company that both she and her husband John own. For this referral to be ethical and legal, Becky must
Give full disclosure to the client at, or prior to the time the referral is made of the affiliation
Real estate agent Kevin tells mortgage broker Lisa that he will send her all of his clients if she’ll give him $100 for each loan she closes. Although Lisa turns him down, she does decide to send Kevin a bottle of wine each time he sends a client to thank him for referring his clients anyway. According to Section 8 of RESPA,
Both Lisa and Kevin committed a prohibited act
Which act prohibits redlining?
Fair Housing Act
_____ is when a real estate agent solicits homeowners to sell property cheaply because of the fear of people of another race or class moving into the neighborhood and then profiting by reselling at a higher price.
Blockbusting
Jim, an appraiser, is told by the lender to “hit the number” on a property or else they would do business elsewhere. Jim appraises the property at a value that is disproportionately above other comparables. What term does the industry commonly use to describe the resulting appraisal?
Inflated
A prohibited activity that involves homeowners who are encouraged to refinance their property over and over until little or no equity remains is known as
Loan flipping
The Equal Credit Opportunity Act (ECOA) sets forth provisions that ensure lenders are fair in their treatment of mortgage loan applicants and borrowers. Under the protections offered by ECOA, when is it acceptable to discourage a borrower from making a formal loan application because the borrower receives public assistance?
Never
MLO Sarah knows that the primary source of income for the customer sitting across from her is public assistance, so she tells him to not waste his time applying. Sarah’s action is not ethical and it is a violation of what law?
ECOA
Intentional or negligent misrepresentation or concealment of material facts is unethical and is most likely an example of
FRAUD
The difference between actual fraud and constructive fraud is that actual fraud
Is intentional
The Equal Credit Opportunity Act (ECOA) sets forth provisions that ensure lenders are fair in their treatment of mortgage loan applicants and borrowers. Under the protections offered by ECOA, how is the lender to ask about an applicant’s marital status?
Are you married, unmarried or separated
Per the Equal Credit Opportunity Act (ECOA), it is unlawful and unethical to discriminate in lending practices by refusing to grant a loan or altering the terms of a loan because of a borrower’s
Membership in a protected class
Reilly, who is five months pregnant, tries to rent an apartment in a six-unit building with access to a shared swimming pool. The property manager rejects her application, citing insurance liability concerns of having small children in the building. Has this property manager violated the federal Fair Housing Act?
Yes, discrimination based on familial status was a factor in the manager’s decision
Mortgage broker Faith recruits her cousin Hope, who has great credit, to apply for a mortgage on the property, even though Hope is moving to Canada and has no intention of paying off the loan. In this case, Hope is called a ________ buyer.
Straw
Who is typically the perpetrator in a fraud for property scheme?
Borrower
Which situation does NOT involve a straw buyer?
Marla revises her pay stubs so she can qualify for a loan to buy her dream house
To address the problem of illegal property flipping, appraisers must analyze the transfer history of a subject property for the previous
3 years
To ensure a loan closes, a mortgage loan originator conceals the fact that the down payment is made with borrowed funds. This could be considered
Actual fraud
____ most commonly commit mortgage fraud for profit.
Industry insiders
A straw buyer is someone who
Fraudulently allows his name and information to be used to obtain a mortgage buy does not intend to live in the house
When an appraiser gives a mortgage loan originator “what’s needed” on the appraisal report, the consumer usually ends up
Using too much of the equity tied to the property
Seller Fred knows that he has an outstanding lien on his property, so he pays one of the professionals involved in the transaction to ignore it so the loan can close. Who did Fred most likely involve in his mortgage fraud scheme?
Title company
The FBI compiles data on mortgage fraud through
SARs
When a borrower commits fraud in an effort to obtain ownership of a property, it is commonly referred to as
Fraud for property
____ is the primary investigator of mortgage fraud in the United States.
The FBI
Seller Mike is signing a listing agreement with agent Alice of River Realty. He purposely leaves out the fact that he is still married to his wife Wendy, although she has moved out of the house. He does not want to share the proceeds of the sale with her. Mike has likely committed
Actual fraud
Mortgage broker Cindy’s customer purposely does not tell her that he just co-signed his nephew’s auto loan. The credit report shows neither that loan nor a credit inquiry, and so that debt is not considered when Cindy gets him pre-approved for a larger mortgage than he really should have. Do you think Cindy did anything wrong?
No, she can’t be held responsible if a client withholds information that does not show on his credit report
The maximum penalty for committing the federal crime of mortgage fraud is
30 years in prison and $1,000,000 fine
What type of property is involved in the air loan fraud scheme?
Non existent
When a person receives an electronic funds transfer transaction aggregating more than $5,000 and suspects that money laundering is behind the transaction, what report needs to be filed?
Suspicious Activity Report (SAR)
The _____ specifically prohibits the free exchange of nonpublic information between consumers’ creditors
Gramm Leach Bliley Act
Which of the following is LEAST likely to be a red flag that fraud is occurring?
Derogatory information on a credit report
A(n) ___ loan is BEST defined as a loan that is a total fabrication used in a mortgage loan fraud scam.
Air
Sharon, a buyer, agrees to pay full price for a home. She doesn’t have the money for a down payment, so she and the seller agree to an undisclosed second mortgage that equals the amount of the desired down payment. This mortgage scheme is known as
Silent second
____ is when someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception.
Identity theft
In a fraud for property scheme, it is likely that
the borrower seeks real estate ownership
XYZ Mortgage Servicing Company has a legal and ethical responsibility to protect consumer information. Under the Gramm-Leach-Bliley Act, what information IS EXEMPT from the nonpublic personal information sharing requirements?
The loan amount that appears on a recorded mortgage
