MLO-Ethics Flashcards
1
Q
- Regarding the Information for Government Monitoring Purposes section of the Uniform Residential Loan
Application, the borrower:
a. must answer all of the questions.
b. has the option of completing it or not completing it.
c. must have the lender complete it.
d. completes it for the Census Bureau.
A
b. has the option of completing it or not completing it.
2
Q
- A loan is denied by the lender and the borrower requests his or her personal documents submitted in connection with the loan application. What should you do as MLO?
a. Send the original documents via certified mail to the borrower.
b. Send the original documents to the lender.
c. Shred the original documents.
d. Return the original documents to the borrower
A
d. Return the original documents to the borrower
Correct answer is (d).
A mortgage loan originator may not retain original documents owned by the borrower and submitted in connection with the loan application.
3
Q
- A mortgage broker may be paid a yield spread premium (YSP) by a lender for selling a loan at an interest
rate above the par rate, as long as the:
a. borrower signs a waiver consenting to the YSP.
b. YSP is approved by the NMLS.
c. YSP is disclosed on the GFE and on the HUD-1 settlement statement.
d. YSP does not exceed 1.5% of the loan amount.
A
c. YSP is disclosed on the GFE and on the HUD-1 settlement statement.
4
Q
4. A mortgage fraud scam that encourages homeowners to refinance their homes until no equity is left is called: a. equity mortgaging. b. property flipping. c. loan flipping. d. reverse mortgage.
A
c. loan flipping.
5
Q
- The purchase contract indicates that the buyer’s purchase price is higher than the listing price. Which of
the following statements is true?
a. This is a red flag
b. The buyer must have been in a bidding war
c. There was an error on the listing agreement
d. This is of no concern to the lender as long as the property appraises for the indicated value
A
a. This is a red flag
6
Q
- An appraiser accepts an assignment that stipulates the $400.00 fee will be paid if the value comes in
above $300,000.
a. This is a normal part of the appraisal business.
b. Provided the appraiser discloses the fee, he or she may accept the assignment.
c. If the property actually does appraise above the preconditioned amount, the appraiser may take the
assignment.
d. An appraiser must not accept an assignment that includes the reporting of predetermined opinions.
A
d. An appraiser must not accept an assignment that includes the reporting of predetermined opinions.
7
Q
- Why is fraud for profit considered a more sophisticated version of mortgage fraud?
a. It involves fraud rings and investment advisors.
b. It involves interstate investors.
c. It involves real estate agents, appraisers, lenders, and closing agents.
d. It involves sophisticated investors.
A
c. It involves real estate agents, appraisers, lenders, and closing agents.
8
Q
- The Financial Privacy Rule of the GLB Act requires financial institutions to give their customers privacy
notices that explain the financial institution’s:
a. history.
b. policy manual.
c. information collection and sharing practices.
d. views on home inspection services.
9
A
c. information collection and sharing practices.
9
Q
9. A questionable fee that is incorporated into the closing costs associated with the loan is a \_\_\_\_\_\_\_\_\_\_ fee. a. junk b. warranty c. guarantee d. appropriate
A
a. junk
10
Q
- The lending practice of putting uninformed consumers in high-fee loans, encouraging frequent refinancing
that does not benefit the borrower, or misrepresenting the loan terms, is known as:
a. flipping.
b. illegal underwriting.
c. predatory lending.
d. underhanded underwriting.
A
c. predatory lending.
11
Q
- Which of the principal parts of the GLB Act protect consumers from individuals and companies that obtain
their personal financial information under false pretenses?
a. Financial Privacy Rules
b. Safeguards Rules
c. Pretexting provisions
d. Consumer Protection Rules
A
c. Pretexting provisions
12
Q
- Which is LEAST LIKELY an example of illegal flipping?
a. Buying and remodeling a property for a quick turnaround
b. Reselling a property before it has even closed
c. Series of sales and quick resales
d. None of the above
A
a. Buying and remodeling a property for a quick turnaround
13
Q
- The most common fraudulent act committed by appraisers is to:
a. falsify appraiser credentials.
b. misuse MLS data.
c. overvalue properties.
d. undervalue properties
A
c. overvalue properties.
14
Q
- Some lenders charge unreasonable prepayment penalties to:
a. ensure early repayment of loans.
b. discourage early payoff of highly profitable loans.
c. penalize borrowers who make early payments.
d. punish borrowers with poor credit.
A
b. discourage early payoff of highly profitable loans.
15
Q
- An example of fraud for property is:
a. bogus sales.
b. stated income / stated asset loan.
c. air loans.
d. straw buyers.
A
b. stated income / stated asset loan.
16
Q
16. If any triggering terms are used in an advertisement, all of the following disclosure must be made, except: a. amount or percentage of downpayment. b. APR. c. closing costs total. d. terms of repayment.
A
c. closing costs total.
17
Q
- When the lender decides to transfer loan servicing, a letter must be sent to the borrower including all the
information below, except the:
a. date and location to which the next payment should be sent.
b. name, address, and phone number of the new servicing company.
c. name, address, and phone number of the title company.
d. contact information for the new loan servicing company.
A
c. name, address, and phone number of the title company.
18
Q
- Under the ECOA, borrowers must be notified whether their loan has been approved or not within
__________ days after filing a complete application.
a. 20
b. 30
c. 40
d. 45
A
b. 30
19
Q
- The United States Attorney General would prosecute a complaint lodged by persons involving racial
discrimination in financing housing under the direction of which one of the following agencies?
a. Department of Human Resources
b. Secretary of Housing and Urban Development
c. Federal Housing Administration
d. None of the above
A
b. Secretary of Housing and Urban Development
20
Q
- If a mortgage broker conducts a free educational seminar to educate a real estate broker’s agents about
new mortgage products who is violating RESPA?
a. Mortgage broker
b. Real estate broker
c. Both the mortgage broker and the real estate broker
d. Neither the mortgage broker nor the real estate broker
A
d. Neither the mortgage broker nor the real estate broker
21
Q
- Is it acceptable for a lender to advertise a low interest with the accurate APR, but convince qualified
applicants to accept another loan with a slightly higher rate and more points?
a. No, because this behavior violates UDAP advertising laws.
b. No, the lender could be accused of using bait and switch tactics to earn more.
c. Yes, the lender advertised an accurate interest rate and APR.
d. Yes, the lender is trying to match the consumer with the best available product.
A
b. No, the lender could be accused of using bait and switch tactics to earn more.
22
Q
- The __________ ensures that all consumers are given an equal chance to obtain credit.
a. ECOA
b. HOEPA
c. RESPA
d. TILA
A
a. ECOA
23
Q
- The Truth in Lending Act requires a disclosure statement be given to the consumer. This statement
includes:
a. a description of the security interest retained and used for the loan.
b. a listing of all items included in the finance charge.
c. the annual percentage rate, fully spelled out.
d. all of the above
A
d. all of the above
24
Q
- If an applicant knowingly gives false information on the Uniform Residential Loan Application:
a. it is a Federal crime.
b. the applicant can be fined.
c. the applicant can be imprisoned.
d. all of the above may apply.
A
d. all of the above may apply.
25
25. Four lenders decided to collaborate and refuse to work with a new mortgage loan originator in the area in
an effort to force the new loan originator out of business. This is an example of:
a. allocating customers.
b. group boycotting.
c. monopolizing the market.
d. price fixing.
b. group boycotting.
26
26. The word used to describe a group of people working together to commit mortgage fraud, is:
a. collision.
b. collusion.
c. collation.
d. collection.
b. collusion.
27
27. Which of the following practices is not prohibited by RESPA?
a. Earned fees
b. Kickbacks and fee-splitting
c. Seller-required title insurance
d. Unlimited deposits into escrow accounts
a. Earned fees
28
28. Which is an example of steering?
a. Agent Alex suggests that John may be happier in a more diverse neighborhood.
b. Banker Bob refuses to make loans in certain parts of town.
c. Broker Betty tells homeowners that their property values will drop if illegal families move in to the
neighborhood.
d. Seller Sam tells his listing agent to show the property to only African-American prospective buyers.
Agent Alex suggests that John may be happier in a more diverse neighborhood.
29
29. Ignorance of the fraudulent actions of those around you:
a. is a good defense if you are arrested.
b. is a good defense if your client complains about your actions.
c. is not a sufficient defense against prosecution.
d. is the policy recommended by liability insurance companies.
c. is not a sufficient defense against prosecution.
30
30. Which of the following is not one of the three principal parts to the privacy requirements of the GLB Act?
a. Financial Privacy Rule
b. Safeguards Rule
c. Consumer Protection Rule
d. Pretexting provisions
Correct answer is (c).
The three principal parts to the privacy requirements are the Financial Privacy Rule, Safeguards Rule, and Pretexting provisions.
31
31. It is unlawful to discriminate in lending practices based on the applicant's:
a. color, national origin, or philosophy.
b. race, familial status, or ethics.
c. color, religion, or sex.
d. national origin, residence, or handicap.
c. color, religion, or sex.
32
32. Mortgage broker Jack was in a hurry to get to the country club for a round of golf. He was impatient with borrower John when John said he didn't understand all of the loan terms. Jack just told him to sign the
papers because "it was the best loan available". Feeling pressure, John signed. Jack's behavior is best
described as:
a. fraudulent.
b. illegal.
c. negligent.
d. unfortunate.
c. negligent.
Correct answer is (c).
Jack's behavior is negligent. Negligence results from carelessness, recklessness, or incompetence.
33
33. Due to the prospective buyer's poor credit, can a real estate agent require the buyer to use a particular
mortgage loan originator?
a. No, making the buyer believe that only one lender can make the loan is a scam.
b. Yes, with full disclosure of the relationship between the agent and the MLO.
c. Yes, only certain lenders make high risk loans.
d. Yes, this is a win-win. The buyer gets the property and the agent earns a commission
a. No, making the buyer believe that only one lender can make the loan is a scam.
34
34. Which is not one of the three tests used by the Federal Trade Commission to determine if something
constitutes an unfair business practice?
a. The practice causes an insignificant consumer injury.
b. The harm of the injury outweighs a countervailing benefit.
c. The practice causes a substantial consumer injury.
d. The consumer could not reasonably avoid the injury.
a. The practice causes an insignificant consumer injury.
35
35. A mortgage fraud scheme is most likely associated with which type of loan?
a. ARM
b. FHA
c. No-doc
d. VA
c. No-doc
36
36. Which federal law was passed to address redlining?
a. CRA
b. ECOA
c. HERA
d. MIDA
a. CRA
Correct answer is (a).
The Community Reinvestment Act helps eliminate redlining by requiring lenders to make loans in the neighborhoods in which they are located.
37
37. Under RESPA, who is subject to fines and penalties if a kickback is paid?
a. the person who paid the kickback.
b. the person who received the kickback.
c. the person who initiated the kickback.
d. anyone who initiated, paid, or received a kickback.
d. anyone who initiated, paid, or received a kickback.
38
38. Which type of real estate professional is exempt from the Fair Housing Act?
a. Appraisers
b. Lenders
c. Mortgage brokers
d. Title companies
d. Title companies
39
39. Which federal legislation was enacted to prohibit businesses from cooperating and conspiring with one
another for the sole purpose of controlling the pricing or competition in their respective industries?
a. Americans with Disabilities Act
b. Fair Housing Act
c. Sherman Antitrust Act
d. Truth in Lending Act
c. Sherman Antitrust Act
40
A mortgage broker who represents a buyer is also licensed to perform the functions of a title insurance
agent. The mortgage broker refers the buyer to the title company and also performs a significant portion
of the work related to issuing the title insurance, for which he receives a percentage of the title insurance
premium paid by the homebuyer. Who has violated RESPA?
a. Both the mortgage broker and the title company
b. Mortgage broker only
c. Neither the mortgage broker nor the title company
d. Title company only
c. Neither the mortgage broker nor the title company
Correct answer is (c).
Under RESPA, kickbacks and unearned referral fees are prohibited. However, fees paid for bona fide services are allowed. With proper disclosure, service providers may pay other service providers for actual services rendered.
41
```
41. A real estate licensee under Federal law should not take restrictive listings or advertise dwellings which
suggest discrimination because of the:
a. Equal Credit Opportunity Act.
b. Fair Housing Act.
c. Fair Credit Reporting Act.
d. SAFE Act.
```
b. Fair Housing Act.
Title VIII of the Civil Rights Act of 1968 and the Fair Housing Amendments Act of 1988, taken together constitute the Fair Housing Act, which prohibits discrimination based on rate, national origin, color, religion, age, sex, and handicap status.
42
42. Fannie Mae refers to the process of purchasing property with the intent of immediately reselling it as:
a. assemblage.
b. flipping.
c. rehabilitating.
d. strawbuying.
b. flipping.
Correct answer is (b).
Flipping can be a legal or illegal activity depending on how it is done.
43
43. What is the commonality of the Privacy Rule, Safeguards Rule, and Pretexting Protection?
a. Alternative Mortgage Transaction Parity Act
b. Garn-St Germain Depository Institutions Act
c. Glass–Steagall Act
d. Gramm-Leach-Bliley Act
d. Gramm-Leach-Bliley Act
44
44. If, for a fee, a real estate broker offers a mortgage company the names and telephone numbers of all the
people who attended an open house who has violated RESPA?
a. Mortgage company
b. Real estate broker
c. Both the mortgage company and the real estate broker
d. Neither the mortgage company nor the real estate broker
b. Real estate broker
Correct answer is (b).
The real estate broker or salesperson is in violation of RESPA. If the mortgage company accepted the offer, it too would be in violation.
45
45. Appraisers are required to analyze the transfer history of a property for the previous ______ in an
attempt to address the problem of property flipping.
a. 6 months.
b. 1 year.
c. 3 years.
d. 4 years.
c. 3 years.
| Appraisers are required to analyze the transfer history of a property for the previous 3 years.
46
```
46. The purpose of the ECOA, as implemented by __________, is to prevent discrimination when granting
credit.
a. Regulation Z
b. Regulation B
c. the Board of Governors
d. the Board of Directors
```
Correct answer is (b).
The primary purpose of the ECOA is to prevent banks and other creditors from discriminating when granting credit by requiring them to make extensions of credit equally available to all creditworthy applicants with fairness, impartiality, and without discrimination on any prohibited basis. It is implemented by Regulation B. The regulation applies to consumer and other types of credit transactions.
47
47. An appraiser accepts an assignment for a refinance from ABC Bank to determine the value of a singlefamily
residence located on an average sized urban lot that backs to a freeway off-ramp. Because the
traffic noise and car exhaust is bad only during rush hour, the lender asks the appraiser to downplay the
poor location of property in the appraisal report. What should the appraiser do?
a. Since it is only affected during rush hour, the appraiser does not need to mention the location in the
report.
b. The appraiser does not need to mention the location because the appraisal will be used for a
refinance.
c. The appraiser must be objective, determine whether the location affects the property adversely, and
report his or her findings.
d. The appraiser should follow the wishes of the client and downplay the location.
c. The appraiser must be objective, determine whether the location affects the property adversely, and report his or her findings.
Correct answer is (c).
It is important for an appraiser to always reveal issues that affect (or can potentially affect) value.
48
48. The __________ establishes procedures for correcting mistakes on a person's credit record and requires
that a consumer's record only be provided for legitimate business needs.
a. Fair Credit Reporting Act
b. Fair Trade Commission Act
c. Home Equity Loan Consumer Protection Act
d. Rights to Financial Privacy Act
a. Fair Credit Reporting Act
Correct answer is (a).
The Fair Credit Reporting Act establishes procedures for correcting mistakes on a person's credit record and requires that a consumer's record only be provided for legitimate business needs.
49
49. The purpose of Regulation Z is to:
a. direct a creditor to provide certain disclosures to the consumer after making a loan contract.
b. deny a consumer the right to cancel certain credit transactions that involve liens on his or her principal dwelling.
c. promote the informed use of consumer credit by requiring disclosures about its terms and costs.
d. do all of the above.
c. promote the informed use of consumer credit by requiring disclosures about its terms and costs
50
50. Equity stripping:
a. is a way for lenders to protect investors from predatory lending practices.
b. occurs when investors prey on the uninformed.
c. only happens in title theory states.
d. None of the above
b. occurs when investors prey on the uninformed.
51
51. An act meant to deceive in order to get someone to part with something of value is known as:
a. deception.
b. fraud.
c. malfeasance.
d. a hoax.
b. fraud.
52
```
52. _________________ is the abusive practice of extending credit with the intent to deceive and take
advantage of the borrower.
a. Equity stripping
b. Predatory lending
c. Trading on equity
d. Underwriting
```
b. Predatory lending
53
53. Which federal act repealed part of the Glass-Steagall Act allowing commercial banks, investment banks,
insurance companies, and securities firms to consolidate?
a. Financial Institutions Reform, Recovery, and Enforcement Act
b. Gramm-Leach-Bliley Act
c. Housing and Economic Recovery Act
d. Troubled Assets Relief Program
b. Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act (GLBA) repealed part of the Glass-Steagall Act prohibiting banks from affiliating with securities firms. This allowed commercial and investment banks, insurance companies, and securities firms to consolidate.
54
54. RESPA requires lenders or servicers to:
a. grant a grace period during the loan servicing transfer.
b. provide a disclosure statement.
c. respond promptly to written inquiries.
d. do all of the above.
d. do all of the above.
Correct answer is (d).
RESPA requires lenders or servicers to provide a disclosure statement, give proper notice when the loan servicing is going to be transferred, grant a grace period during the transfer of the loan servicing, and respond promptly to written inquiries.
55
55. A seller with an outstanding lien against the property paid one of the parties to the transaction to ignore
the lien. Which party was most likely involved in the seller's mortgage fraud scheme?
a. Appraiser
b. Closing officer
c. Lender
d. Title company
d. Title company
Correct answer is (d).
The title company is in the position to remove the lien from the title report.
56
```
56. The GLB Act gives authority to __________ federal agencies to administer and enforce the Financial
Privacy Rule and the Safeguards Rule.
a. 1
b. 2
c. 4
d. 8
```
d. 8
Correct answer is (d).
The Gramm-Leach-Bliley Act gives authority to eight federal agencies and the states to administer and enforce the Financial Privacy Rule and the Safeguards Rule.
57
57. Blockbusting is also known as:
a. discrimination.
b. mansionization.
c. panic selling.
d. red zoning.
Correct answer is (c).
| Blockbusting, or panic selling, are illegal activities.
58
58. Under the Truth in Lending Act, when a borrower wishes to borrow money as a hard-money junior loan
and agrees to use his residence as security for the loan, how many days has he to rescind his offer?
a. 3 days
b. 5 days
c. 7 days
d. 30 days
a. 3 days
59
59. The “Gramm-Leach-Bliley Act” or GLB Act includes provisions to:
a. protect consumers' personal financial information held by financial institutions.
b. help consumers gain better credit options.
c. guide consumers on how to refinance their homes.
d. assist consumers in selecting the best appraisals for their properties.
a. protect consumers' personal financial information held by financial institutions.
60
60. Patty is a mortgage broker who owns a 3% interest in the ABC Escrow Company. When Patty refers
borrowers to ABC, she does not give them an Affiliated Business Arrangement (AfBA) disclosure. Is this
a violation of RESPA?
a. No, because she is not the owner of ABC Escrow Company.
b. No, because she owns less than 10% of ABC Escrow Company.
c. Yes, because any referral to a settlement service provider necessitates an AfBA disclosure,
regardless of interest.
d. Yes, because any interest over 1% in a settlement service provider necessitates an AfBA disclosure.
d. Yes, because any interest over 1% in a settlement service provider necessitates an AfBA disclosure.
61
61. The Financial Privacy Rule and the Safeguards Rule of the GLB Act apply to “financial institutions” that include all of the following, except:
a. banks.
b. home inspection companies.
c. insurance companies.
d. securities firms.
b. home inspection companies.
Correct answer is (b).
The Financial Privacy Rule and the Safeguards Rule apply to “financial institutions” that include banks, securities firms, insurance companies, and companies that provide many other types of financial products and services to consumers.
62
62. According to the ECOA, what is the legal and ethical way to inquire about a consumer's marital status?
a. "Are you married or single?"
b. "Are you married, single, or separated?"
c. "Are you married, unmarried, or separated?"
d. "Are you married, in a domestic partnership, unmarried, or separated?"
c. "Are you married, unmarried, or separated?"
Correct answer is (c).
The correct way to check marital status is to use all three words: "married, unmarried, or separated".
63
63. Lender Jack, his appraiser friend Alice, and his cousin Rob work together obtain loans on overvalued
properties. Alice prepares an inflated appraisal for the property, Rob obtains the loan (even though he
has no intention of repaying it), and Jack approves the loan. In this scenario, Rob would be considered a:
a. bona fide buyer.
b. flipper.
c. smart businessman.
d. straw buyer.
d. straw buyer.
Correct answer is (d).
A straw buyer is a borrower who will never make payments on the loan.
64
```
64. Lenders who make real estate loans and brokers who arrange these loans must comply with __________
disclosure laws.
a. city and state
b. federal
c. state
d. federal and state
```
d. federal and state
65
65. A property owner received a notice from a lender stating that he was delinquent on his home loan. The
address of the property was correct, but he knew he owned the property free and clear. Upon calling the
lender, he discovered that someone had falsified documents and taken out a loan in his name. Which
type of fraud is this?
a. Equity theft
b. Silent second
c. Stated Income/Stated Asset
d. Straw buyer
a. Equity theft
Correct answer is (a).
In equity theft, fraudsters locate an unoccupied property and forge a deed transfer or a satisfaction of lien. Then they obtain new mortgages on the property without the true owner's knowledge. The homeowner does not know about it until he or she receives a notice of default, or worse yet, an eviction notice.
66
66. When completing a loan application, a consumer who intentionally withholds information that would
disqualify him or her from obtaining a loan, commits mortgage fraud based on:
a. collusion.
b. commingling.
c. misrepresentation.
d. omission.
d. omission.
67
67. A common trait of predatory lending is that the lender:
a. charges outrageous fees.
b. charges average interest rates.
c. has affordable repayment terms.
d. discloses all loan fees and terms early in the loan process.
a. charges outrageous fees.
68
68. Of the choices presented, which is the best description of values?
a. Values are subjective and mutable.
b. Values are objective and consistent.
c. Values are subjective and unswerving.
d. Values are objective and capricious.
a. Values are subjective and mutable.
69
```
69. The Equal Credit Opportunity Act protects a borrower when he or she deals with any creditor who
regularly extends credit, such as:
a. banks.
b. small loan and finance companies.
c. retail and department stores.
d. all of the above.
```
d. all of the above.
70
70. Pat contacts Mr. Gray at Easy Mortgage Brokers for a loan to purchase a home. He has bad credit and
no down payment. Mr. Gray tells Pat that there will be no problem getting him a loan and pressures him
to come to the office to sign loan papers. When Pat arrives and reads over the paperwork, he is upset by
the inflated interest rate and outrageous fees as shown on the Good Faith Estimate. When asked, Mr.
Gray tells Pat he can refinance in 2 years when his credit improves. Mr. Gray neglects to tell Pat that this
loan has a 5-year lock-in clause and will have a huge prepayment penalty. What type of lending practice
is this?
a. Precise lending
b. Precedent lending
c. Precocious lending
d. Predatory lending
d. Predatory lending
71
71. If an appraiser gives the loan originator "what's needed to close the deal" on the appraisal, the
consumer:
a. pays too much for the property.
b. borrows more for the property.
c. may be upside down and not be able to sell the property.
d. may experience all of the above.
d. may experience all of the above.
72
72. A lender who does not automatically cancel PMI when the LTV reaches 78% is in violation of:
a. ECOA.
b. FHA.
c. HOEPA.
d. HPA.
d. HPA.
Correct answer is (d).
The Homeowners Protection Act (HPA) requires lenders to cancel the PMI when the LTV reaches 78% during normal amortization of the loan. Borrowers can request cancellation at 80% of the LTV.
73
73. A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a
borrower's loan to another loan servicer. Generally, the loan servicer must notify the borrower
__________ days before the effective date of the loan transfer.
a. 10
b. 15
c. 30
d. 45
b. 15
74
```
74. A set of principles or values by which an individual guides his or her behavior and judges that of others is
called:
a. credibility.
b. edicts.
c. ethics.
d. goodwill.
```
c. ethics.
75
75. Alex, a residential loan originator, has been in the lending business for 20 years. He has made a good reputation and makes a nice living for his wife Martha and their two children. He attributes his success to his personal ethics. How is ethics defined?
a. Beliefs about which things are right and which are wrong as applied to others
b. Set of orders or proclamations that must be followed by oneself and others
c. Set of principles or values by which an individual guides his or her own behavior and judges that of others
d. Trust among people who spend time together
c. Set of principles or values by which an individual guides his or her own behavior and judges that of others
76
76. __________, which is the illegal use of a property's location to deny financing or insurance, is an unfair
discriminatory practice that originated in the 1930s.
a. Blacklisting
b. NIMBY
c. Brownfielding
d. Redlining
d. Redlining
77
77. Regarding a national fee panel or appraiser roster, which statement is INCORRECT?
a. It creates a list of appraisers who are registered to perform the necessary appraisals.
b. Lenders who wish to order an appraisal would be required to order it through the panel.
c. Lenders who wish to order an appraisal would continue to order it directly from an appraiser.
d. All appraisers would be state licensed or certified.
c. Lenders who wish to order an appraisal would continue to order it directly from an appraiser.
Correct answer is (c).
The appraiser roster creates a list of appraisers who are registered to perform the necessary appraisals. Such a panel would consist of appraisers. Lenders who wish to order an appraisal would be required to order it through the panel. Direct contact between the lender and the client would be illegal.
78
78. A mortgage loan originator can violate the antitrust laws relating to real estate mortgage lending, by
participating in any of the following, except:
a. dividing the market.
b. group boycotting.
c. price fixing.
d. tithing.
d. tithing.
79
79. Of the following questions when asked of a prospective borrower, which would not be unethical and
illegal?
a. "What church do you attend?"
b. "What type of property do you want to buy?"
c. "Do you have children?"
d. "Do you regularly take prescription medication?"
b. "What type of property do you want to buy?"
80
80. An appraiser intentionally undervalues the properties in an area to keep the values of property in that
area low. Which law is violated by the appraiser's actions?
a. Equal Credit Opportunity Act
b. Fair Housing Assistance Program
c. Fair Housing Act
d. Fair Credit Reporting Act
c. Fair Housing Act
Correct answer is (c).
Fair Housing Act of 1968 - Mortgage Lending. No one may discriminate in appraising property based on race, color, national origin, religion, sex, familial status or handicap (disability).
81
81. What is a non-existent property loan that has no collateral?
a. Air loan
b. Bogus loan
c. Flipping
d. Straw loan
a. Air loan
82
82. A property insurance company hosts a dinner for the employees of a mortgage broker. Afterwards, the
designated broker encourages the employees to send clients to the insurance company. Who has violated
RESPA?
a. Only the mortgage broker
b. Only the property insurance company
c. Both the mortgage broker and the title insurance company
d. Neither the mortgage broker nor the title insurance company
c. Both the mortgage broker and the title insurance company
83
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83. What is the abusive practice of extending credit with the intent to deceive and take advantage of the
borrower?
a. Equity stripping
b. Predatory lending
c. Underwriting
d. None of the above
```
b. Predatory lending
84
84. The use of false presences, including fraudulent statements and impersonation, to obtain consumers' personal financial information, such as bank balances, is known as:
a. consumer protection.
b. guarding.
c. pretexting.
d. scanning.
c. pretexting
85
85. A federal act that provides protection against foreclosures of real property owned by a person in the
service is:
a. Serviceman's Readjustment Act of 1944.
b. Servicemembers Civil Relief Act.
c. Moratorium Relief Act of 1968.
d. Release of Obligation Act of 1947.
b. Servicemembers Civil Relief Act.
86
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86. Which federal law requires that the phrase "equal housing lender" be used in any advertisement that is
broadcast?
a. Fair Housing Initiatives Act
b. Fair Credit Reporting Act
c. Fair Housing Act
d. Truth in Lending Act
```
c. Fair Housing Act
87
87. In an advertisement, which phrase would be permissible and not trigger additional disclosures?
a. "Low 4.75% interest rate on refis."
b. "Easy terms to qualified buyers."
c. "No money down."
d. "100% financing."
b. "Easy terms to qualified buyers."
88
88. If a person calls to ask about a loan product, how should a loan originator quote the interest rate in order to comply with TILA?
a. Quote the APR only.
b. Quote both the interest rate and the APR.
c. Quote the interest rate only.
d. TILA does not address this issue.
b. Quote both the interest rate and the APR.
89
89. Under TILA, which of the following is not included in the finance charge for a real estate loan?
a. Credit report fees
b. Finder fees
c. Loan fees
d. Mortgage insurance fees
a. Credit report fees
Correct answer is (a).
In real estate loans, the finance charge may include interest, loan fees, finder fees, insurance fees, and mortgage insurance fees (PMI or MMI). For real estate loans, the finance charge does not include appraisal fees or credit report fees. [FDIC 6500, Reg. Z Part 226, Section 226.4 Finance Charge]
90
90. Which of the principal parts of the GLB Act governs the collection and disclosure of customers' personal financial information by financial institutions?
a. Financial Privacy Rule
b. Safeguards Rule
c. Pretexting provision
d. Consumer Protection Rule
a. Financial Privacy Rule
Correct answer is (a).
The Financial Privacy Rule of the GLB Act governs the collection and disclosure of customers' personal financial information by financial institutions.
91
91. One purpose of the Home Valuation Code of Conduct (HVCC) is to prevent lenders from:
a. packaging loans with credit insurance and other fees that add no value.
b. pressuring appraisers to make pre-determined valuation on properties.
c. putting borrowers in high-rate loans.
d. reporting payment history on a borrower's credit report.
b. pressuring appraisers to make pre-determined valuation on properties.
Correct answer is (b).
One purpose of the Home Valuation Code of Conduct (HVCC) is to prevent lenders from pressuring appraisers to make pre-determined valuation on properties.
92
92. TILA requires lenders to disclose important terms and costs of their loans. Which of the following is a required disclosure?
a. Finance charge
b. Payment terms
c. Number of payments
d. All of the above
d. All of the above
93
94. A lender would violate RESPA by:
a. charging a borrower an attorney fee for legal services.
b. charging a borrower a wire transfer fee.
c. paying a fee to a real estate agent or developer for referring a borrower.
d. paying its employee a bonus for generating new business
c. paying a fee to a real estate agent or developer for referring a borrower.
94
93. The laws that are currently in place have not eliminated lender pressure. What safeguards could be
implemented to prevent lender pressure?
a. Pass state and federal laws that make such coercion illegal
b. Mandate heavy fines and jail time as penalties for coercion
c. Establish a national fee panel or appraiser roster
d. All of the above
d. All of the above
95
95. With the approval of the borrower, lenders often suggest adding credit insurance to increase the overall
profit margin on a loan. They can do this as long as they include the price:
a. of the premium in the finance charge.
b. to the borrower after a year.
c. of the premium in the APR.
d. of the premium in the finance charge and in the APR.
d. of the premium in the finance charge and in the APR.
96
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96. Which fraud for profit scheme is accomplished by purchasing properties and artificially inflating their value
through false appraisals?
a. Air loans
b. Bogus sales
c. Flipping
d. Straw buyers
```
c. Flipping
97
97. When the right of rescission applies, a borrower can rescind a hard money loan until midnight of the
__________ business day after the promissory note is signed.
a. 3rd
b. 5th
c. 7th
d. 10th
a. 3rd
98
98. A loan originator was found guilty of paying kickbacks to the title company and the real estate agent who
referred the buyer. According to RESPA, what is the maximum fine that can be imposed?
a. $5,000
b. $10,000
c. $15,000
d. $20,000
Correct answer is (d).
| The fine for each kickback is $10,000, therefore the loan originator could be fined up to $20,000.
99
99. ABC Lender faxes an assignment to an appraiser with a note written at the top stating the value must be for at least $325,000. If the appraiser accepts this assignment, has USPAP been violated?
a. No, this assignment is permitted within the context of USPAP.
b. Yes, this assignment is prohibited by the ETHICS RULE.
c. No, this assignment is permitted if the fees are disclosed properly.
d. No, this assignment is permitted by the ETHICS RULE.
b. Yes, this assignment is prohibited by the ETHICS RULE.
100
100. Which of the principal parts of the GLB Act requires all financial institutions to design, implement, and
maintain safeguards to protect customer information?
a. Financial Privacy Rule
b. Safeguards Rule
c. Pretexting provision
d. Consumer Protection Rule
b. Safeguards Rule
Correct answer is (b).
The Safeguards Rule of the GLB Act requires all financial institutions to design, implement, and maintain safeguards to protect customer information.
101
101. Under the Fair Housing Act, lenders are prohibited from:
a. refusing to make a mortgage loan based on familial status.
b. imposing different terms or conditions for women when they apply for a loan.
c. setting different terms or conditions based on a person's ethnicity when purchasing a loan.
d. doing any of the above.
d. doing any of the above.
102
102. The Fair and Accurate Credit Transactions Act of 2003 allows consumers to request and obtain a free
credit report once every __________ from each of the three nationwide consumer credit reporting companies—Equifax®, Experian®, and TransUnion®.
a. 12 months
b. 6 months
c. 3 months
d. month
a. 12 months
103
103. With fraud for property the borrower:
a. has no intention of repaying the loan.
b. wants ownership of the property.
c. and others are colluding to gain from the scam.
d. is flipping the property.
b. wants ownership of the property.
104
104. What is a mortgage buy back?
a. Lenders forcing mortgage brokers to buy back bad, fraudulent loans
b. Sellers buying back their properties from dissatisfied buyers
c. Real estate brokers buying points to help borrowers qualify for loans
d. Purchasers buying back their promissory notes to retire the debt
a. Lenders forcing mortgage brokers to buy back bad, fraudulent loans
Correct answer is (a).
Faced with fallout from mortgage fraud, many lenders are suing the mortgage brokers and forcing them to buy back bad loans.
105
105. Which statement is not a purpose of the Real Estate Settlement Procedures Act?
a. Disclose the APR for a loan
b. Help consumers get fair settlement services
c. Protect consumers by eliminating kickbacks
d. Protect consumers by prohibiting certain practices that increase the cost of settlement services
a. Disclose the APR for a loan
Correct answer is (a).
The purposes of RESPA are to help consumers get fair settlement services by requiring that key service costs be disclosed in advance, to protect consumers by eliminating kickbacks and referral fees that unnecessarily increase the costs of settlement services, and to further protect consumers by prohibiting certain practices that increase the cost of settlement services.
106
106. Which federal law allowed savings and loan associations to enter the business of commercial lending,
trust services, and non-mortgage consumer lending?
a. Depository Institutions Deregulation and Monetary Control Act
b. Emergency Economic Stabilization Act
c. Glass-Steagall Act
d. Gramm-Leach-Bliley Act
a. Depository Institutions Deregulation and Monetary Control Act
Correct answer is (a).
The Depository Institutions Deregulation and Monetary Control Act of 1980 had sweeping changes, one of which was to allow savings and loan associations to enter the business of commercial lending, trust services, and non-mortgage consumer lending.
107
107. A mortgage broker charges a borrower a uniform fee for origination services as well as a fee for
reimbursement of credit reporting and appraisal charges. All charges are disclosed to the borrower. Who
is in violation of RESPA?
a. Lender
b. Mortgage broker
c. Both lender and mortgage broker
d. Neither lender nor mortgage broker
d. Neither lender nor mortgage broker
Correct answer is (d).
A mortgage broker must disclose all payments he receives either directly from the borrower or indirectly from the lender. Because the mortgage broker made the appropriate disclosures, no one is in violation of RESPA.
108
108. The real estate market slowed down appreciably, so new loans and refinancing are infrequent. As a result, mortgage broker Bob feels fortunate to receive a phone call from a buyer to finance the purchase of a 3-bedroom / 2-bathroom tract house. The buyer tells Bob that he makes $5,000 verifiable monthly income working retail. The buyer gives Bob an income statement indicating the $5,000 monthly income, but it is from a company that Bob has never heard of. At one time, Bob would not have hesitated to decline the loan because that amount of income seems unreasonable and the company seems bogus. Now, however, Bob needs the money. Which statement describes Bob's situation?
a. Mortgage brokers placed in this position often put personal needs before other ethical obligations.
b. This situation could create an ethical dilemma for Bob.
c. Bob should follow standard underwriting guidelines and not yield to pressure from the buyer.
d. All of the statements are correct.
d. All of the statements are correct.
109
109. Which federal law protects against discrimination in the sale, rental, or financing of residential property on
the basis of race, color, national origin, religion, sex, familial status, or handicap?
a. CRA of 1977
b. ECOA of 1976
c. FHA of 1988
d. MDIA of 2008
c. FHA of 1988
110
110. Convincing borrowers to repeatedly refinance their loans in order to charge high points and fees each time is an example of predatory lending, called:
a. flipping.
b. panic peddling.
c. redlining.
d. steering.
a. flipping.
111
111. A mortgage lender affiliated with a title company offers its customers a discount price for the title
company's services. The customer is not required to use the services of that title company and the
customer is given an affiliated business disclosure form. Who is in violation of RESPA?
a. Mortgage lender
b. Title company
c. Both the mortgage lender and the title company
d. Neither the mortgage lender nor the title company
d. Neither the mortgage lender nor the title company
112
112. According to the Department of Housing and Urban Development (HUD), an individual who “takes a residential mortgage loan application” includes someone that :
a. photocopies a loan application.
b. faxes a copy of the loan application to a lender.
c. takes down a borrower's information for purposes of completing a loan application.
d. mails a copy of the loan application to the borrower.
c. takes down a borrower's information for purposes of completing a loan application.
113
113. The two types of fraud are fraud for _______________ and fraud for _______________.
a. hire / profit
b. profit / property
c. appraisal / hire
d. property / identity
b. profit / property
114
114. The HUD Equal Housing Opportunity logo must be placed on all of the following, except the company's:
a. business cards.
b. brochures.
c. promissory notes.
d. website.
c. promissory notes.
Correct answer is (c).
The HUD Equal Housing Opportunity logo must be placed on all printed (and electronic) promotional material. Promissory notes are not promotional material.
115
115. How could someone fall victim to identity theft?
a. A prospective borrower uses a fictitious or stolen identity on a loan application.
b. A professional license number could be used with a forged signature to falsify reports.
c. A person neglects to shred documents containing personal information.
d. All of the above
d. All of the above
116
116. The Gramm-Leach-Bliley Act is also known as the:
a. Consumer Act of 1999.
b. Financial Modernization Act of 1999.
c. Financial Privacy Act of 1999.
d. Modernization Consumer Act of 1999.
b. Financial Modernization Act of 1999.
