ETHICS Flashcards
Who does the LO work for?
you are working for the borrower, but you must protect your company.
Fair Lending, Fair Housing, & ECOA advise what?
Everyone has the right to apply.
All of the borrowers information must be kept Confidential under…..?
Gramm, Leach Bliley and the Safeguard Rules
You must consider ___________, but you only have to count it if the assistance meets program requirements for income.
Public Assistance
You __________ the right to change documentation to assist the borrower meeting program guidelines.
do not have
Define: Redlining
You cannot refuse to take an application, no matter the location of the property.
Define: Reverse Redlining
Charging more for interest rates and costs in a certain area, because of risk factors or the area itself.
Define: Steering
You cannot steer the borrower to live in a certain area or force them to take a specific program.
No _____ or _____ can be paid for any reason.
Referrals / Kickbacks
All joint marketing is to be split ___ - ___.
50-50
If an appraiser is connected to anyone in the loan, the appraiser must be _______.
Replaced
You cannot talk to or contact the appraiser to…..?
influence value, threaten payment, or cut them off from any new business.
It is your responsibility to report any loan files to your compliance officer on which you feel the borrower is providing _________ information.
fraudulent
You can be penalized or fired if you…….?
doctor any documents for the borrower.
It is your responsibility to inform the underwriter of….? Why?
Changes to the loan file. If you don’t the company will have to repurchase a loan because of information that was withheld. The investor will find out.
It is your responsibility to make sure the ______ & _______ match up with your verifications.
Bank Statements & Income
What must be verified on all agency programs?
All income, assets, and any information when qualifying the borrower.
If you are offering a borrower a non-traditional loan, you must….?
Show the borrower examples of other loan products that you offer.
Any person that does one of the following is required to be licensed:
Takes or solicits loan applications.
Negotiates terms.
Expects compensation on the loan.
When is an Affiliated Business Disclosure required?
If an MLO is licensed as a Realtor & Loan Officer OR if they or their family own as little as 1% of a third-party company.
Define: Referral
Anything of value being given or received from a third-party company, realtor, or builder.
Are kickbacks allowed in receiving or paying on any transaction?
No
When should an appraiser excuse themselves from an assignment?
if they are connected, in any way, to anyone on the transaction.
You cannot use any language that would __________________________________ with your company.
infer the consumer should not apply
Define: Asset Fraud
Verifications must match the documentation given to you by the borrower.
Define: Sales Contract Red Flags
Sellers on the contract must match with the title owners listed on the title report.
Explain personal property during fraud checks.
Must be backed out of the sales price, as you can only borrower against real estate. Also, the appraiser cannot appraise personal property into the value.
Define: Occupancy Fraud
FHA requires the borrower to owner occupy for 60 days. Fannie, Freddie, USDA, & VA require the borrower to occupy the property.
FHA requires the borrower to owner occupy for ___________?
60 days
What are the loan types that require the borrower to occupy the property?
Fannie, Freddie, USDA, and VA
Explain Income Fraud
Make sure verifications match the documentation provided by the borrower. the 4506-C must match their tax returns. You need to verify overtime and bonuses are likely to continue.
Define: Power of Attorney (POA)
Refers to who is given the right to sue it and whether it is a limited or full POA. Any POA must be approved by the underwriter.
Why is fraud increasing?
Due to medical or home providers are applying for and closing Cash-Out Refinances without the owner’s knowledge.
Define: Wire Fraud
Ever-increasing fraud, where the borrower receives a request for funds to be wired to someone that is not connected to the transaction. It’s crucial to tell the borrower not to wire funds without asking you or the title company if the request is real.
What should you advise the borrower in regards to wire fraud?
To not wire funds without asking you or the title company if the request is real.
When does application fraud occur?
When information on the credit report and application do not match, such as SS#, residency, and work history.
What information would you not provide to the borrower?
if a SAR has been filed against them as well as any information that is on your verifications.
How to check for employment fraud?
Check if bank statement income deposits match the verification of income. Contact employer to verify employment date, if they are still employed, etc.
How to check for liability fraud?
Check if the borrower has disclosed all debts, alimony, or child support.
When you should not post advertisements and why?
if they do not have the rates, products, or programs. This misleads the borrower.
Do not use ______ & _______ tactics like posting enticing rates to get the borrower to call you so you can try to switch them to another product.
Bait & Switch
Do not use any language, words, or information that ____________ to the borrower or indicate to the borrower that they should ___________ with you.
are detrimental / not apply
What does APR stand for?
Annual Percentage Rate
An annual percentage rate (APR) must be on…….?
Any marketing piece, radio, TV, or newspaper that contains a number.
What are some examples of annual percentage (APR)?
rates, mortgage amount, or closing costs.
is “We have the best rates in town” that does not require an APR?
correct, this does not require an APR because there is no number involved.
What must you disclose on the LE?
All costs and terms of the loan
What does LE stand for?
Loan Estimate
What does CD stand for?
Closing Disclosure
The LE and CD must be delivered to…..?
meet the required time frames under TRID.
Should incomplete documents be delivered?
No
What does POA stand for?
Power of Attorney
What is one of the major causes of fraud?
POA (Power of Attorney)
When is a POA allowed?
once it is approved by the underwriter
What is one of the biggest reasons borrowers complain, according to the CFPB?
not answering the borrowers complaints and phone calls.
Should you answer the borrowers complains and phone calls?
Yes, ALWAYS.
Who is responsible for the loan if they are required to sign the mortgage?
borrowers, co-borrowers, & co-signors.
What should you always assume?
That the borrower knows nothing about the loan process.
What should you never tell the borrower and why?
Never tell the borrower when to lock or not lock. That will only come back to bite you and cost you or your company money.
What is the Fair Housing Act?
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.
What does FHA stand for?
Fair Housing Act
Who does the FHA protect?
Prohibits discrimination in housing because of RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, FAMILIAL STATUS, & DISABILITY
What does the FHA Cover?
Most housing
How does the Fair Housing Act regulate the mortgage industry?
It states it is illegal to discriminate, as well as to:
- 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 person’s 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/buyer.
- Do not make statements that exclude persons with protected characteristics or express a preference for one characteristic over others.
- 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.
If you use human models in your advertisements, make sure that…..?
the images are as inclusive and representative as possible so that all populations are welcomed.
You must always give truthful information about……?
availability, price, amenities, and features of a housing unit.
What must you post a copy of in a conspicuous location in your office/building?
non-discrimination policy and/or a HUD Fair Housing Poster
Use advertising outlets and online tools that reach the ________ audience possible. ______ - __________ - your market.
broadest / broaden / don’t restrict
Who commits fraud for housing?
The borrower
Explain Fraud for Housing.
The borrower wants to purchase a property that they can’t afford. They typically fabricate income, assets, or other types of supporting documents to obtain a loan. They intend to repay the loan but they commit fraud to obtain the property.
Define Fraud for Profit.
Industry insider fraud. When a mortgage broker partners with either an appraiser, etc to inflate property value or anything to benefit the loan.
Define Fraud for Criminal Enterprises
For money laundering purposes / The mob.
Please explain the Foreclosure Rescue Schemes.
Entities identify people who are in foreclosure and mislead them into believing they can prevent the foreclosure. They will sell the property to an investor or straw buyer with a promise that the borrower can rebuy the property at some point. They will end up defaulting on the loan and the hone is foreclosed upon anyway.
Please explain Loan Modification Schemes.
Assisting individuals with loan modifications that require upfront fees to even help the individuals. They either walk away with the fee or negotiate unfavorable terms for the borrower. The borrower ultimately lose their homes.
Define Illegal Property Flipping.
When a property is purchased, falsely appraised at a higher value and then quickly sold.
What makes property flipping illegal?
the fraudulent appraisal information or false information provided during the transactions.
The Illegal property flipping schemes, typically involve one or more the following?
- Fraudulent appraisals.
- Falsified loan documentation.
- Inflated buyer income or
- Kickbacks to buyers, investors, property/loan brokers, appraisers, and title company employees.
Please explain builder bailout.
Builders facing rising inventory and declining demand for newly constructed homes employ bailout schemes to offset losses. Builders find buyers who obtain loans for the properties but who then allow the properties to go into foreclosure.
Please explain Condo Conversion Scheme.
Apartment complexes purchased by developers during a housing boom are converted into condos and in a declining real estate market, developers often have excess inventory of units. So, developers recruit straw buyers with cash-back incentives and inflate the value of the condos to obtain a larger sales price at closing.
During a builder bailout/condo conversion scheme, what is not disclosed to the lender in order for the borrower to qualify/be eligible to purchase?
Cash-back incentives and the straw buyers income/asset information are often inflated in order for them to qualify for properties they normally are not eligible to qualify for.
Equity Skimming.
An investor may use a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyers name. Subsequent to closing, the straw buyer signed the property over to the investor in a quit claim deed, which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later.
Silent Second.
The buyer of the property borrowers the down payment from the seller through the issuance of a nondisclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The 2nd mortgage may not be recorded to further conceal its status from the primary lender.
Air Loans.
This is a nonexistent property loan where there is usually no collateral. They involve brokers who invent borrowers and properties, establish accounts for payments, and maintain custodial accounts for escrows. They may establish an office with a bank of telephones, each on used as a fake employer, appraiser, credit agency, etc., to fraudulently deceive creditors who attempt to verify information on loan applications.
Chunking
A real estate investment scam that is typically run through ‘get rich quick’ real estate seminars. The organizers of the seminars offer the student investors a no-hassle real estate investment whereby the organizers will locate great real estate deals, arrange for mortgages, handle any necessary property rehabilitation, locate and place tenants, collect rents and handle the mortgage payments.
Is acting as a straw borrower or credit partner a federal crime?
yes
Straw Buyer.
A person that applies for a mortgage loan but has no intention of actually being responsible for the loan. In other words, another person is expected to make the payments and be the party responsible to the lender on the loans. Straw borrowers are often paid to act as the borrower. This is a federal crime.
Churning.
Refinancing a home loan over and over again when its not necessary for the purpose of obtaining additional fees.
Redlining
The practice of denying services, either direct or selectively raising prices, to residence of certain areas based on the racial or ethnic makeups of those areas.
Blockbusting
