Ethics Flashcards
What is Ethics?
Moral Principals that govern a persons behavior or conduct
What is Morality?
Principals concerning the distinction between right and wrong or good and bad behavior
Name the 3 types of mortgage fraud
- Fraud for Housing
- Fraud for Profit
- Fraud for Criminal Enterprise
What is fraud for housing?
When borrower materially misrepresents information on a mortgage loan application. Such as employment, income, or assets.
What is Fraud for Profit?
Aims at not securing housing but to misuse the mortgage lending process to steal cash and equity from lenders or homeowners.
What is fraud for criminal enterprise?
Fraud committed by organized crime organizations for money laundering. Patriot Act and Bank Secrecy Act both look to stem this.
What are Straw Buyers
An individual used by fraudsters to obtain mortgages. Entity will compensate individual with lump sum.
What are Air Loans
Is a loan that has a straw or non-existent buyer, or a non-existent property. Totally pulled out of thin air.
Explain illegal Property Flips
Illegal property flipping occurs when the property is purchased and resold quickly at an artificially inflated price by using inflated appraisals.
What is chunking
The sale of properties at artificially inflated prices, pitched as investment opportunities to naive real estate investors who are promised high returns and loan risks.
What is builder/excessive sales incentive
Builder with several unsold units schemes to sell the remaining properties fraudulently
What is a buy and bail
Homeowners is current on their mortgage but the value o their house has fallen below the amount owed. Purchase new property to bail on the one that is underwater
What is a foreclosure rescue scheme?
Fraudsters that promise to help borrower avoid foreclosure. Charging upfront costs and giving bad advise.
What is MARs Rule or Mortgage Assistance Relief Services Rule
It made it illegal to charge upfront fees and requires specific disclosures in ads for mortgage assistance relief providers.
What is a short sale
Means of selling a house for less than the outstanding mortgage on it. An option before being repossessed by the lender.
What is short sale fraud
When a perpetrators profit by concealing parties to the transaction or contingent transactions or falsifying material information, including the actual value of the property, so the services can not make an informed short sale decision
What are Unauthorized Fees and payout Characteristics
Type of foreclosure rescue scheme where an advance fee scheme is perpetrated by a foreclosure rescue specialist where fees and payouts were not approved by the servicer agreeing to the short sale reflected on the HUD-1 or CD
A non-arm’s length short sale transaction
Occurs when the borrower has a direct relationship or business affiliation with seller. Family member buying home at a reduced cost
What is a short sale flip
Perpetrator manipulates the short sale lender into approving a short payoff and conceals an immediate contingent sale to a pre-arranged end-buyer at a significantly higher sales price
What is reverse mortgage fraud
Manipulates the senior citizen into obtaining a revers mort. Loan and then pockets the senior victims proceeds.
What is Affinity Fraud
Person rely on a a common bond and exploit the trust and friendship that typically exists in the group of individuals with a common bond to support the scheme. Ie. Church
What is equity-skimming scheme
A investor buys a property from a homeowner facing foreclosure and agrees to lease the home to the homeowner who may remain in the house as the tenant. Eventually will reconvey the property to homeowner again via a deed.
What is a loan modification?
Permanent restructuring of a mortgage if a borrower cannot make a payments due to financial hardship
What is a loan modification scheme?
Charge upfront fees along with options to keep someone in house that is facing delinquency. Putting homeowners in higher risk of losing home.
What was the purpose of the Dodd-Frank Wall Street reform and consumer protection act (Dodd-Frank) in terms of prohibiting practices.
Prohibited unfair, deceptive, or abusive acts or practices (UDAAP)
What is Predatory Lending?
Unscrupulous actions carried out by a lender to entice, induce or assist a borrower in taking a mortgage that carries high fees, interest rates, or takes an advantage of borrower.
What is credit insurance packing?
Occurs when a lender sneaks in paperwork at closing that provides for credit insurance or other benefits that the borrower did not request. Lender tries to sneak signature.
What is price gouging?
When a vendor takes advantage of consumer by charging high prices, through fraudulent acts or because the consumer has no other alternative
What is equity stripping?
When a lender allows the borrower to get a loan they do not qualify for therefore lender is after the borrowers equity when they foreclose
What is churning or repeated refinancing ?
Is excessive selling/lending activity to generate fees and commissions. Multiple refinances or switching from arm to fixed etc.
What is steering and targeting?
Occurred when am MLO steers borrower into a subprime product when they could qualify for a better loan. Normally incentive for originator
What time are telemarketers unable to call?
May not call before 8am or after 9pm
With the telemarketing and consumer fraud and abuse prevention act, what are the existing customer solicitation rules?
An existing customer is 18 mo and 90 days for a pre-qual.
What is fair lending?
Essentially granting access to credit to everyone and anyone who wishes to submit an application
Desperate treatment is either 2 things, that is?
Overt discrimination or comparative evidence
What is overt discrimination?
Lender openly discriminates or prohibits basis; this can be a written policy or an oral statement.
What is comparative evidence of discrimination?
Is when it isn’t as obvious that discrimination was made. But if you compare similar files between two different races they are the same and different rates were used.
What is Disparate Impact?
Occurs when a a policy or practice is put into place and disproportionately excludes or burdens certain groups of people on a prohibited basis. For example a min loan limit of 150,000 in a minority neighborhood with average home values of 100,000.
What is Redlining?
When a institution makes in extremely difficult for a certain area or neighborhood to borrow money.
What is reverse redlining?
Where a financial institution lends specifically in poor inner-city neighborhoods to charge them more than a white consumer
What is blockbusting?
When real estate agents and developers attempt to convince white owners to sell houses at low prices by promoting fear that racial minorities are soon moving to area.
