Ethics

How many days before transfer must a borrower receive a servicing transfer statement?

15 STS must be received 15 days prior to transfer.

Which situation is least likely to be an example of predatory lending?

ABC Mortgage Co. offers a subprime loan to Mark, who is coming out of bankruptcy. A subprime loan in and of itself is not evidence of predatory lending. The other situations should raise red flags, and are potential indicators of predatory lending, however.

A loan originator who discovers in the process of verification that a borrower has underreported his current debt obligations should refuse to process the loan based on the

Ability to Repay Rule. According to the Ability to Repay rule, a creditor shall not make a loan unless the creditor makes a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to the terms. In the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), Congress adopted similar (but not identical) Ability-to-Repay (ATR) requirements for virtually all closed-end residential mortgage loans. Congress also established a presumption of compliance with the ATR requirements for a certain category of mortgages, called Qualified Mortgages (QMs).

During the application process, a mortgage loan originator asks if the borrower is widowed; the MLO is violating which law?

ECOA states that a loan originator can ask if the borrower is married, unmarried, or separated. The MLO may not ask if the borrower is widowed or single.

What law guarantees borrowers' rights to challenge an appraisal report and/or credit decision?

Equal Credit Opportunity Act Right to challenge - regardless of what is being challenged - is ECOA. While appraisals in general are under the AIR Laws / Reg Z, the right to challenge an appraisal is under ECOA Reg B to prevent discrimination.

The Equal Credit Opportunity Act, designed to limit discrimination in credit transactions, includes which restriction?

No questions can be asked about income not offered to help repay the loan. Under the ECOA, an applicant is not required to disclose income not offered to help repay the loan, and a loan originator may not discriminate against an applicant who exercises his or her good faith rights of nondisclosure of those sources of income.

A mortgage broker rents office space from a title company at a discount in exchange for referring customers for settlement services. Which federal law does this arrangement violate?

RESPA This would be an example of a kickback or thing of value, which is prohibited under RESPA.

The FBI compiles data on mortgage fraud through

SARs. The FBI compiles data on mortgage fraud through Suspicious Activity Reports (SARs) filed by federally insured financial institutions, and from reports from the Department of Housing and Urban Development's Office of the Inspector General.

Which question would not be considered a violation of the ECOA, even if asked very innocently during the loan interview process?

You look very young; can I see some proof of your age? While you could make an argument that each of these questions might violate ECOA guidelines related to illegal discrimination, the question about the applicant's age may be necessary to prove that the applicant is old enough to legally enter into a contract.

If a mortgage loan originator or a real estate agent engages in the practice of soliciting homeowners in a particular community to sell their properties because people of other races, religions, or social status have purchased in the area, that MLO or real estate agent would be guilty of

blockbusting. Blockbusting is soliciting others to sell their properties due to the changes in a neighborhood.

Larry's current credit score would not qualify him for a conforming loan, but he is eager to purchase a house. Which lender practice would be the most likely indication of predatory lending?

bundling life insurance premiums into the mortgage Charging reasonable fees that are higher than those for a more qualified buyer would not necessarily indicate predatory lending. Bundling other products in with the mortgage for no other reason than to raise fees, however, could be considered predatory.

The unlawful act of steering is

channeling buyers to certain neighborhoods based on their race or ethnic background. Steering as prohibited by the Fair Housing Act is the discriminatory practice of channeling buyers to certain neighborhoods based on their race or ethnic background.

Under the protections offered by Equal Credit Opportunity Act (ECOA), when qualifying a potential borrower a lender may not consider that the borrower

is a senior citizen. A lender will consider income adequacy, sufficient net worth, job stability, and credit rating. Age (if over 18), marital status, and receipt of public assistance are protected classes under the ECOA law.

When is it acceptable to discourage a borrower from making a formal loan application due to the fact that the borrower receives public assistance?

never Under the Equal Credit Opportunity Act, no borrower may be discouraged from making a formal loan application. The borrower is entitled to the same process as anyone else.

According to the Gramm-Leach-Bliley Act, which would not be considered nonpublic personal information and, therefore, is not protected?

recorded mortgages A mortgage that has been recorded is public information and is, therefore, not covered by the privacy provisions of the Gramm-Leach-Bliley Act.

Which household does NOT qualify as a protected class under the familial status clause of the Fair Housing Act?

retired couple Being retired does not necessarily indicate age as an individual could retire early, and is not a protected class regardless. Familial status refers to households that include individuals under the age of 18 who either live with parents or legal custodians. This protection also extends to pregnant women or any person in the process of obtaining legal custody of a child under the age of 18

If an MLO or real estate agent suggests to a client that he move to a particular area to reside in a community that he will "fit into," that loan originator or real estate agent would be guilty of

steering. Steering (under the Fair Housing Act) is when a loan originator or real estate agent "advises" a borrower to move, or not move, to an area to "fit in." with a particular demographic or protected class.

Martina, a Hispanic loan applicant, informs Kyle, the mortgage loan originator at the time of application that her husband, who is African-American, receives his total monthly income from Social Security disability payments and the company she works for has just announced cutbacks and she would be laid off. The down payment they plan to use was promised as a gift from Martina's parents but Kyle has not been provided with a copy of the gift letter. The reason that Martina's loan application is denied is most likely

the ability to repay cannot be reasonably confirmed. Under the Ability to Repay Rule, a creditor must not make a loan unless the creditor makes a reasonable and good faith determination that the consumer has the reasonable ability to repay the loan. Making the decision not to grant the loan based on reasons of race or source of income would be illegal under Fair Housing and Fair Lending (ECOA) laws. It is no problem that the down payment comes from a gift but it is another concern that the promise of the gift is not documented.

Seller Dan knows that he has an outstanding lien on his property, so he pays one of the parties to the transaction to ignore it. Who did Dan most likely involve in his mortgage fraud scheme?

title company If the title company intentionally leaves the lien off the title report, the other parties to the transaction may have no knowledge about it and, therefore, be innocent of any attempted fraud.

Lucy and Ricky have both worked as mortgage loan originators for five years. They decided to start a mortgage brokerage and called it Babalu Mortgage Corp. They are not making enough money yet to hire a processor and prefer to spend their time selling. What is their best solution?

use a third party processing company A third party processing company is the best solution to this situation.