ETHICS

According to federal fair lending laws, which of the following cannot be considered when qualifying an applicant for a loan? a. A female applicant is 4 months pregnant and might not continue working once her baby is born. b. A disabled applicant's credit report shows several instances of 60-and 90-day late credit card payments. c. A minority applicant does not have sufficient funds for down-payment. d. A female applicant's credit report and application show gaps of several months between jobs over the past 2 years.

a. A female applicant is 4 months pregnant and might not continue working once her baby is born.

Which of the following describes an air loan? a. A fictitious borrower obtains a mortgage and secures it with fictitious property. b. A loan that is presented to the borrower with hidden fees. c. A loan is obtained with inflated property values. d. A loan that is repeatedly refinanced with no benefit to the borrower.

a. A fictitious borrower obtains a mortgage and secures it with fictitious property.

Property flipping occurs when: a. A property is bought and resold within a very short period of time. b. The Title of a property is passed to a family member. c. Someone accepts a fee to falsely claim ownership to a property. d. Someone secures a loan with fictitious property.

a. A property is bought and resold within a very short period of time.

A title insurance company provides a computer to a mortgage broker. The computer is used to transmit electronic documents from the mortgage broker's office to the title insurance company. Who is in violation of RESPA? a. Both the title insurance company and the mortgage broker. b. The title insurance company. c. The mortgage broker. d. Neither the title insurance. company nor the mortgage broker.

a. Both the title insurance company and the mortgage broker.

Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower's repayment ability? a. Home Ownership and Equity Protection Act. b. Real Estate Settlement Procedures Act. c. Fair and Accurate Credit Transactions Act d. Equal Credit Opportunity Act.

a. Home Ownership and Equity Protection Act.

A real estate company accepted flyers from a mortgage company and made them available to prospective buyers during an open house. Who has violated RESPA? a. Neither the real estate company nor the mortgage company. b. The real estate company. c. The mortgage company. d. Both the real estate company and the mortgage company.

a. Neither the real estate company nor the mortgage company.

An advertisement that states, "Refinance and we can save you up to $300 per month!" is: a. Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true. b. A TILA violation only if the loans are not available. c. A violation of TILA d. A TILA violation because it targets struggling homeowners.

a. Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true.

Advertising an attractive interest rate that a mortgage professional is not at liberty to offer is a major ethical offense and a violation of: a. Regulation Z b. The Equal Credit Opportunity Act c. The Fair Credit Reporting Act. d. Regulation X

a. Regulation Z

For a fee, a real estate licensee offers a mortgage company the names and telephone numbers of all of the people who attended an open house, but the mortgage company does not accept the offer. Who is in violation of RESPA? a. The Real Estate Licensee. b. The mortgage company. c. Neither the mortgage company nor the real estate licensee. d. Both the mortgage company and the real estate licensee.

a. The Real Estate Licensee.

Which of the following requires mortgage professionals to implement and maintain security protocols to ensure the confidentiality of consumer information? a. The Safeguards Rule b. The Confidentiality Rule c. The MAP Rule d. The ATR Rule

a. The Safeguards Rule

A mortgage broker is required to provide an opt-out notice in which of the following cases? a. The mortgage broker shares non-public personal information with non-affiliated third parties. b. The mortgage broker only shares nonpublic personal information with 3rd parties who perform settlement services for the customer. c. The mortgage broker only shares nonpublic personal information with affiliates. d. The mortgage broker only allows its loan originators and the employee supervising the company's security program to access nonpublic personal information.

a. The mortgage broker shares non-public personal information with non-affiliated third parties.

Mike Maxwell is a small business owner who is applying for a refinance on his home. During the loan application interview, he asks how much income he needs to show in order to qualify for the loan. What is the most ethical response? a. "You should not show less than $4,500 a month." b. "Let's review your tax returns and bank statements to determine your income." c. "Let me ask the underwriter what you need to qualify." d. "As much as possible - what do you claim on your tax returns?"

b. "Let's review your tax returns and bank statements to determine your income."

A "straw buyer" is: a. A buyer who uses another individual's identity in order to obtain a mortgage for which he or she is not eligible. b. A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application. c. A buyer who intends to purchase property but does not intend to occupy it. d. A buyer who is a victim of identity theft.

b. A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application.

Which of the following constitutes a "thing of value" that would violate RESPA? a. A mortgage broker pays an insurance company for mortgage insurance. b. A loan originator gives an airline travel voucher to an attorney for introducing a customer. c. A mortgage broker gives a paid vacation to all of its employees as a holiday bonus. d. A loan originator pays a title company for title search service.

b. A loan originator gives an airline travel voucher to an attorney for introducing a customer.

Prior to recent regulatory changes, "yield spread premium" was traditionally defined as: a. A fee paid by borrowers to lenders for lowering the note rate on their loan transaction. b. An amount paid by a lender to a loan originator for closing a loan at a rate higher than the rate for which the borrower qualifies. c. Income available to a settlement service provider who has entered into a legitimate affiliated business arrangement. d. A fee between service providers for sharing settlement responsibilities.

b. An amount paid by a lender to a loan originator for closing a loan at a rate higher than the rate for which the borrower qualifies.

It is permissible for loan processors to: a. Negotiate loan rates and terms with a loan applicant. b. Contact loan applicants in order to obtain information needed to process a loan. c. Discuss the advantages and disadvantages of various loan products with a loan applicant. d. Provide counseling to loan applicants in order to help them choose the best products.

b. Contact loan applicants in order to obtain information needed to process a loan.

Basing a loan approval on only the appraised value of a borrower's collateral and failing to consider repayment ability constitutes which of the following ethical violations? a. Redlining b. Equity-based lending c. Discrimination d. Appraisal Fraud

b. Equity-based lending

Michael purchased a luxury home in 2006 using funds secured through a stated-income loan. In 2008, the IRS audited him, and began to suspect mortgage fraud upon discovering that he never earned enough to qualify for a loan to buy his expensive home. Using an undercover agent, the IRS recoded Michael admitting that he had used a "liar loan" to purchase his home. Having obtained this information, the IRS: a. May only bring an action against the lender that funded Michael's loan. b. May refer Michael's file to law enforcement authorities for an action for mortgage fraud. c. May only bring an action against Michael if he has failed to make timely payments on his home loan. d. May not refer Michael's file to law enforcement authorities, since so many consumers were exaggerating their income on loan applications during the mortgage boom.

b. May refer Michael's file to law enforcement authorities for an action for mortgage fraud.

Which of the following mortgage broker policies would violate fair lending laws? a. Doing business only with customers who are seeking loans for residential properties. b. Refusing to originate loans in ZIP codes known to be economically depressed. c. Originating loans only for customers who live within 100 miles of the broker's location. d. Refusing to originate loans in an earthquake zone.

b. Refusing to originate loans in ZIP codes known to be economically depressed.

Advertising an attractive interest rate that a mortgage professional is not at liberty to offer is a major ethical offense and a violation of: a. The Fair Credit Reporting Act b. Regulation Z c. The Equal Credit Opportunity Act d. Regulation X

b. Regulation Z

Cindy is a loan originator who specializes in refinances. A local appraiser calls her and promises to deliver any appraisal that she needs for her refinances, telling Cindy, "All you have to do is let me know the valuations that you need!" What are Cindy's obligations under the appraisal rule? a. She has no particular obligations b. She must report the actions of the appraiser to the state appraiser and licensing authorities and submit a request for a new appraisal. c. She must call the appraiser and ask that he refer the assignment to another appraiser who does not have a conflict of interest. d. Her company must order a new appraisal for any valuation performed by that appraiser.

b. She must report the actions of the appraiser to the state appraiser and licensing authorities and submit a request for a new appraisal.

For which of the following reasons would it be permissible to refuse to take an application from a potential borrower? a. The applicant has poor credit and you do not feel there is any way that he will meet lender guidelines. b. The borrower has alluded to the fact that she is submitting false documents in order to qualify for a larger loan. c. The lender does not accept applications from the residential area where the borrower lives. d. You do not click with the applicant and would rather not do business with him.

b. The borrower has alluded to the fact that she is submitting false documents in order to qualify for a larger loan.

It is unethical and illegal to use yield spread premiums for any reason other than: a. To earn an additional commission on a loan origination. b. To help a borrower pay for settlement costs. c. To enable a loan originator to meet a monthly sales quota. d. To enable a creditor to earn more on a mortgage transaction.

b. To help a borrower pay for settlement costs.

Which of the following statements offers the most accurate description of the effect of using a "trigger term" in an advertisement for a loan? a. Use of a trigger term requires clear and conspicuous disclosure of HUD-approved housing counselors. b. Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence. c. Use of a trigger term in an advertisement violates Regulation Z. d. Use of a trigger term requires the disclosure of all the lending terms of the mortgage described in the advertisement.

b. Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence.

If a mortgage broker were to take on the role of a borrower's agent, the mortgage professional is said to have: a. Power of Attorney b. A financial partnership c. A Fiduciary Duty d. A Fidelity Agreement

c. A Fiduciary Duty

Which of the following transactions would be exempt from the ATR Rule? a. A refinance transaction. b. A mortgage secured by a vacation home. c. An open-end HELOC. d. A first lien on a home.

c. An open-end HELOC.

A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA? a. The hazard insurance company b. The mortgage broker employees. c. Both the hazard insurance company and the mortgage broker employees. d. Neither the hazard insurance company nor the mortgage broker employees.

c. Both the hazard insurance company and the mortgage broker employees.

In states with an agency requirement, which of the following practices could violate a mortgage broker's duty to serve as a borrower's fiduciary? a. Failing to secure more than one appraisal for a refinance. b. Advising a borrower who wants an FHA loan that he or she should apply for a conventional/conforming loan. c. Failing to submit an FHA loan application at the borrower's request. d. Failing to pay third-party service providers within 30 days from their date of service.

c. Failing to submit an FHA loan application at the borrower's request.

The Government National Mortgage Association is also known as_____ or ______. a. Georgia Mac; GNMC b. Ginger May; GNAM c. Ginnie Mae; GNMA d. Greta Mae; GNA

c. Ginnie Mae; GNMA

A mortgage broker enters into a rental agreement with a real estate agent where the rent for the office space is at the prevailing market price. Who has violated RESPA? a. The mortgage broker b. Both the mortgage broker and the real estate agent c. Neither the mortgage broker nor the real estate agent. d. The real estate agent.

c. Neither the mortgage broker nor the real estate agent.

A title company advertises in a real estate company's publication by paying the required fees. Who is in violation of RESPA? a. The real estate company. b. The title company. c. Neither the real estate company nor the title company. d. Both the real estate company and the title company.

c. Neither the real estate company nor the title company.

Which of the following compensation practices is allowed under the Loan Originator Compensation Rule? a. Paying originators a commission for originating a loan at a higher rate than the rate for which the loan applicant qualified. b. Allowing a mortgage broker to accept an origination fee from a borrower and a commission from the lender that funds the loan. c. Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan. d. Implementing a policy that encourages loan originators to originate refinances with prepayment penalties.

c. Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan.

A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct? a. The fee is illegal, unless the brokers provide a disclosure to the client. b. The fee is legal, as long as the brokers do not have a pre-existing agreement in place for payment of referral fees. c. Payment of the fee is illegal. d. The fee is legal, as long as the brokers have a pre-existing agreement in place.

c. Payment of the fee is illegal.

According to fair lending laws, age may be considered as a factor in denying a loan application if: a. The application is too old to survive the term of the loan. b. The applicant is too young or too old to understand the terms of the contract. c. The applicant is too young to enter into a contract. d. The applicant is too young to have accumulated savings and requires a gift from his or her parents in order to make a down-payment.

c. The applicant is too young to enter into a contract.

Which of the following statements would be permissible when communicating with an appraiser? a. "Your appraisals have been coming in lower than expected lately. We are going to start using another appraiser." b. "Your last appraisal did not meet the minimum value we expected. We are going to have to wait on paying your invoice until we obtain a second opinion." c. "I need this property to value at a minimum of $200,000." d. "Can you explain why this property is valued so low, compared to the current market?"

d. "Can you explain why this property is valued so low, compared to the current market?"

The obligation for mortgage brokers to serve as the agent or the fiduciary of borrowers is: a. Imposed by state licensing laws in every state. b. Imposed by the Dodd-Frank Act c. Imposed by the S.A.F.E. Mortgage Licensing Act. d. Imposed by state licensing laws in some states.

d. Imposed by state licensing laws in some states.

When Michael wanted to purchase a home in 2006, his mortgage broker told him that his income was insufficient to qualify for the mortgage. When Michael insisted on trying to purchase the home, his mortgage broker suggested that he complete an application for a stated-income loan, and told him the minimum income level that he needed to include on the application in order to qualify for a mortgage. Michael completed the loan application, adding $20,000 to the minimum amount that his broker suggested. The broker reviewed the application and Michael signed it. Which of the following statements most accurately describes the liability that can arise from this scenario? a. Neither Michael nor the mortgage broker is liable, since it was common practice in 2006 to exaggerate a loan applicant's income level. b. Michael is solely responsible for misrepresentation, since he inflated his income more than was necessary to secure the loan. c. The mortgage broker is solely liable, because he encouraged Michael to misrepresent his income. d. Michael and the mortgage broker are liable for submitting a loan application that contains false information.

d. Michael and the mortgage broker are liable for submitting a loan application that contains false information.

A mortgage broker has 49% ownership in a title company. The mortgage broker refers business to the title company and also provides written disclosures to the borrower detailing the business relationship. The written disclosure also makes it clear that the borrower is not required to use the services of the title company. Who is in violation of RESPA? a. The mortgage broker b. Both the title company and the mortgage broker c. The title company d. Neither the title company nor the mortgage broker.

d. Neither the title company nor the mortgage broker.

The Gramm-Leach-Bliley Act protects the privacy of nonpublic personal information using all of the following methods, except: a. Offering consumers the right to opt out of the sharing of nonpublic personal information. b. Requiring a security program for the protection of nonpublic personal information. c. Advising consumers of the financial institutions's policies regarding the use and exchange of personal information. d. Requiring financial institutions, including mortgage companies, to obtain permission for the use and sharing of consumers' nonpublic personal information.

d. Requiring financial institutions, including mortgage companies, to obtain permission for the use and sharing of consumers' nonpublic personal information.

In which of the following cases would it be permissible for a mortgage professional to withhold compensation to an appraiser? a. The appraiser has consistently provided valuations that were not as high as the mortgage professional hoped they would be. b. The appraiser has provided extensive paperwork to substantiate valuation results. c. The appraiser has failed to change information in a valuation at the request of the mortgage professional, because he or she says it would make the report inaccurate. d. The appraiser has provided valuations that used inappropriate comparables, included errors, and were generally inaccurate.

d. The appraiser has provided valuations that used inappropriate comparables, included errors, and were generally inaccurate.