NATIONAL MORTGAGE LOAN ORIGINATOR ETHICS PART A

Mortgage companies need to establish internal policies that comply with the Telemarketing Sales Rule. Internal compliance policy can allow an MLO to call a consumer that makes an inquiry or submits an application to the company for up to ____ month(s) from the inquiry/application date. 12 6 1 3

3 If a consumer makes an inquiry or submits an application to a company, the company can call for three months unless the consumer has asked to be put on the company's internal Do Not Call list.

A consumer reporting agency that receives a request accompanied by proper identification must place a security freeze on the consumer credit report no later than ______ business day(s) after receiving such request. 5 30 10 1

1 A Consumer Reporting Agency (CRA) may not charge consumers for freezing and unfreezing their credit file. A CRA that receives a request accompanied by proper identification must place a security freeze on the consumer credit report no later than one business day after receiving such request.

A consumer wants to file a complaint against XYZ Mortgage Company specific to the inaccuracy of fees provided via the Loan Estimate and Closing Disclosure. With what federal entity could this complaint be filed? A. Consumer Financial Protection Bureau B. Department of Housing and Urban Development C. The Federal Trade Commission D. Nationwide Multistate Licensing System & Registry

A. Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (CFPB) helps consumers connect with financial companies to understand issues, fix errors, and get direct responses about problems. The complaint process should start with the consumer filing an online complaint with the CFPB. If a consumer files a complaint through the CFPB online system, the CFPB will first forward the complaint to the company complained about for a response; sometimes another government agency is enlisted to help. Within 15 days (60, on rare occasions) the company is expected to report back on any steps taken (or planned) to address the issue(s) in the complaint. The complaint is published in the CFPB Consumer Complaint Database along with a description of what happened after the complaint was filed; personal information is removed before publication. The CFPB will let the consumer know when the company responds, let the consumer review the response, and give the consumer 60 days to provide feedback.

Mortgage broker Bran is working with customer Arya. Bran recommends that she get a thorough home inspection and recommends Winter Inspections. Do you think that Bran can ethically and legally accept a $50 referral fee from Winter Inspections if Arya hires them? A. No, a mortgage broker can never accept a fee or rebate for unearned settlement expenditures by his customer. B. Yes, as long as Bran gave her the name of at least one other inspection company. C. Yes, as long as it is a reputable company and Arya is happy with its work, Bran can accept the fee. D. Yes, if Bran discloses the referral fee in writing to Arya, he can accept the fee.

A. No, a mortgage broker can never accept a fee or rebate for unearned settlement expenditures by his customer. It is not ethical or legal for a mortgage broker to accept or pay anything of value for the referral of settlement services.

MLO Sarah knows that the primary source of income for the customer sitting across from her is public assistance, so she tells him to not waste his time applying. Sarah's action is not ethical and it is a violation of what law? HMDA ECOA CRA TILA

ECOA Under the Equal Credit Opportunity Act, no applicant may be discouraged from making a formal loan application due to the fact that the applicant receives public assistance.

The Fair Housing Act requires what to be posted in all institutions where mortgage loans are made? Equal Housing Opportunity house logo loan originator's license name mortgage broker's license number the broker's business logo

Equal Housing Opportunity house logo he Fair Housing Act requires the Equal Housing Opportunity "house" logo be posted.

______ is the making of loans that take advantage of poorly informed consumers through excessively high fees, misrepresentation of loan terms, and frequent refinancing that does not benefit the borrower. Mortgage fraud Predatory lending Subprime lending Illegal underwriting

Predatory lending Predatory lending involves originating loans that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower, and other prohibited acts.

Ethically and by law, lenders must not be involved in the prohibited act of exchanging items of value for the referral of business to or from a settlement service provider. Which federal legislation prohibits the illegal exchange of kickbacks and referral fees? ECOA RESPA FCRA TILA

RESPA Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits the giving or accepting a fee, kickback, or thing of value pursuant to an agreement or understanding (oral or otherwise), for referrals of business incident to or part of a settlement service involving a federally-related mortgage loan.

As mortgage broker Sam puts together an ad to attract some new customers, he should follow the requirements of what law to ensure his ad is not misleading or deceptive? TILA NAMB FACTA RESPA

TILA The Truth in Lending Act (TILA) contains very specific requirements for clearly and conspicuously advertising the terms of a mortgage loan so that it is not deceptive or misleading.

___ is the primary investigator of mortgage fraud in the United States. Local officials The Mortgage Bankers Association The FBI HUD

The FBI The FBI investigates matters relating to fraud, theft, and embezzlement occurring within or against the national or international financial community.

A for-profit MLO who claims to be a "counselor" in an ad about loan modification is in violation of what law? Fair Lending Act Truth in Lending Act Fair and Accurate Credit Transaction Act Home Ownership and Equity Protection Act

Truth in Lending Act The Truth in Lending Act (TILA) contains very specific requirements for clearly and conspicuously advertising the terms of a mortgage loan so that it is not deceptive or misleading. TILA specifically prohibits the use of the term "counselor" by a for-profit lending entity.

If an appraiser intentionally underestimates an appraisal value to keep the values in that area low, that appraisal would be violating provisions of what law? Equal Credit Opportunity Act Fair Credit Reporting Act Fair Housing Act Truth in Lending Act

Truth in Lending Act The Truth in Lending Act (TILA) requires an appraiser to evaluate an appraisal based upon a fair assessment. Appraiser conduct is generally regulated by TILA/Regulation Z, whereas equal lending of credit would be governed by ECOA. Intentionally underestimating a property's value deflates the property values of the entire community and is prohibited.

Seller Mike is signing a listing agreement with agent Alice of River Realty. He purposely leaves out the fact that he is still married to his wife Wendy, although she has moved out of the house. He does not want to share the proceeds of the sale with her. Mike has likely committed actual fraud. material misstatement. constructive fraud. negligent misrepresentation.

actual fraud Actual fraud is an intentional misrepresentation or concealment of a material fact. Mike intentionally omitted material facts about a co-owner on the listing agreement that could void any transaction.

Jim, an appraiser, is told by the lender to "hit the number" on a property or else they would do business elsewhere. Jim appraises the property at a value that is disproportionately above other comparables. What term does the industry commonly use to describe the resulting appraisal? inflated value challenged embellished overstated

inflated An inflated appraisal occurs when a property is appraised with a higher-than-market value by an appraiser acting in collusion with a borrower or lender.

What sources of income CANNOT be used when qualifying a borrower for a mortgage loan? sporadic overtime and bonuses revealed alimony and child support regular earnings and overtime pensions, interest, and dividends

sporadic overtime and bonuses Stable monthly income is the monthly income that can reasonably be expected to continue in the future. Sporadic overtime and bonuses would not be allowable - the key word being "sporadic."

The Fair Housing Act does NOT require that the Equal Housing Opportunity logo be displayed on business brochures. advertisements. websites. the Closing Disclosure.

the Closing Disclosure. The Fair Housing Act requires that the Equal Housing Opportunity logo be displayed on all printed promotional material; but, NOT on the actual loan closing documents.

If a consumer thinks his identity has been stolen, he may want to place a temporary freeze on his credit report. What is the maximum fee that a CRA may charge a consumer for placing a freeze on the consumer's credit file? $5 $0 $25 $10

$0 A Consumer Reporting Agency (CRA) may not charge consumers for freezing and unfreezing their credit file. A CRA that receives a request accompanied by proper identification must place a security freeze on the consumer credit report no later than one business day after receiving such request.

The compliance officer at a mortgage company must file a SAR when he observes electronic funds transfer transactions aggregating _____ or more that involve potential money laundering or violations of the Bank Secrecy Act. $5,000 $10,000 $20,000 $15,000

$5,000 As set forth by the Bank Secrecy Act/Anti-Money Laundering Act, a Suspicious Activity Report (SAR) must be filed for electronic funds transfer transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act.

If a consumer feels he has been discriminated against under the Fair Housing Act, he has ____ year to go to ____ to file a complaint. 3 years, Department of Finance 3 years, NMLS 1 year, CFPB 1 year, Department of Housing and Urban Development

1 year, Department of Housing and Urban Development If a borrower feels they have been discriminated against under Fair Housing, he has one year to go to U.S. Department of Housing and Urban Development (HUD) to file a complaint.

If the final APR at settlement deviates by more than ______ from the initial APR on the preliminary Closing Disclosure on an adjustable-rate mortgage loan, an additional waiting period is triggered. 3/8% 1/2% 1/4% 6/8%

1/4% Any change to the initial APR disclosed in the original LE or CD that deviates by more than 1/4% (.250) for any loan type including irregular loans - such as an ARM - will require a correct Closing Disclosures, which triggers a period of three business days after the borrower receives the updated disclosures before the loan can close. The tolerance is .125% or 1/8% for regular (fixed, closed-end) loans.

As set forth by the FCRA, creditors who furnish information about consumers to consumer reporting agencies must correct, delete, or verify information within ____ days of receipt of a dispute. 45 15 10 30

30 As set forth by the FCRA, creditors who furnish information about consumers to consumer reporting agencies must correct, delete, or verify information within 30 days of receipt of a dispute.

The maximum penalty for committing the federal crime of mortgage fraud is $500,000 fine. 5 years in prison and $500,000 fine. 10 years in prison. 30 years in prison and $1,000,000 fine.

30 years in prison and $1,000,000 fine. Each conviction for mortgage fraud carries a maximum penalty of 30 years in prison, a $1 million fine, or both.

When an MLO is printing a receipt for a consumer's credit card or debit card number, FACTA requires that no more than ____ digits of any customer's card or debit card number appear on the receipt. 6 3 4 5

5 Section 113 of the FACTA sets forth customer-protecting provisions regarding the truncation of credit and debit card numbers. Section 113 prohibits businesses from printing more than five digits of any customer's card number or card expiration date on any receipt provided to the cardholder at the point of sale or transaction.

A consumer reporting agency (CRA) must disclose to the consumer the recipients of a consumer's credit report which it has furnished for a purpose other than for employment within the _____-month period preceding the request. 3 5 6 1

6 A CRA must disclose to the consumer the recipients of any consumer report on the consumer which it has furnished for purposes other than for employment within the six-month period preceding the request.

Section 36 of Regulation Z sets forth requirements for compensating MLOs. As set forth in Regulation Z, which is a prohibited compensation act? A. An MLO receives compensation from a mortgage banker based on the loan type. B. An MLO receives compensation from a mortgage broker based on an hourly rate for time worked. C. An MLO receives compensation from a mortgage broker based on long-term loan performance. D. An MLO receives compensation from a mortgage banker based on the loan volume he originates.

A. An MLO receives compensation from a mortgage banker based on the loan type. Compensation can be based on any of the following triggers: Flat fee fixed in advance, hourly rate for time worked, overall loan volume, long-term loan performance, existing/new customer, and pull-through rate; i.e., quality of loan files. An MLO cannot be compensated for loan origination activities based on the loan type or any loan term other than the loan amount. The interest rate or program type of the loan must never be a basis for compensating an MLO.

What mortgage broker's act is prohibited? A. Broker Dora collects a rate lock-in fee from a client payable to the broker. B. Broker Emily collects a rate lock-in fee from a client on the mortgage lender's behalf, payable to the mortgage lender. C. Broker Stephen presents a lender's offer that a loan will be made at a specified rate if the loan is closed by the given expiration date and if the applicant can meet the qualification standards. D. Broker Damion collects a rate lock-in fee required by a governmental agency to be collected directly by the mortgage broker.

A. Broker Dora collects a rate lock-in fee from a client payable to the broker. A mortgage broker is prohibited from directly collecting a rate lock-in fee, except where it is required by a governmental agency to be collected directly by the mortgage broker, issue a mortgage rate lock-in, or otherwise represent to a first mortgage loan applicant, or the applicant's representative, that the loan will be made at a specified rate if the loan is closed by the expiration of a specified period of time. A mortgage broker may provide a mortgage lender's mortgage rate lock-in to a mortgage loan applicant, or the applicant's representative, on behalf of such mortgage lender and collect a rate lock-in fee on the mortgage lender's behalf, payable to the mortgage lender.

Which of the following does NOT accurately reflect a requirement set forth by FACTA for companies to properly secure or dispose of confidential customer information? A. Companies must not maintain loan documents via electronic storage methods. B. Companies must dispose of consumer information by destroying or erasing electronic files or media. C. Companies must place all pending loan documents in locked desks, cabinets, or storage rooms at the end of the workday. D. Companies must dispose of documents with consumer information by burning or shredding.

A. Companies must not maintain loan documents via electronic storage methods. Reasonable methods for security and disposal include burning or shredding papers that contain consumer report information so that information cannot be reconstructed; destroying or erasing electronic files or media so that information cannot be recovered or reconstructed; and placing all pending loan documents in locked desks, cabinets, or storage rooms at the end of the workday. Companies can maintain loan documents via electronic storage methods as long as electronic disposal requirements are met when disposal is required.

Which situation does NOT involve a straw buyer? A. Marla revises her pay stubs so she can qualify for a loan to buy her dream house. B. Blake agrees to secure a home loan for his friend in Blake's name, claiming he will live there even though he will not. C. Portia allows her name and credit to be used in an illegal property flipping scheme in exchange for $10,000. D. Rob's brother signs an application for a primary residence loan to acquire a house for Rob because his credit is better than Rob's.

A. Marla revises her pay stubs so she can qualify for a loan to buy her dream house A straw buyer involves a third party who allows his/her name and identity to be used for the purpose of purchasing or refinancing a property. In this case, Marla acts alone, revising her paystubs, and committing fraud for property. All the other situations involve a straw buyer.

Cory is planning to purchase his first home and his real estate agent said that he must use a specific lender or else face having his loan denied due to his shaky credit record. Is this a legal practice? A. No, it is illegal to steer a buyer to a lender with the impression that using the lender is required. B. Yes, since this is the only lender who will make the deal work. C. Yes, as long as the agent discloses her affiliation with the lender. D. Yes, only certain lenders will loan to higher-risk borrowers.

A. No, it is illegal to steer a buyer to a lender with the impression that using the lender is required. Unfortunately, in many mortgage fraud scams, the buyer is unsophisticated in seeking financing and may have credit issues that make lending more challenging. A real estate agent that tells a buyer that a specific lender must be used for a loan to be approved is practicing illegal steering.

Anderson Mortgage Company has decided to outsource its loan processing activities to Total Processing, Inc. Pursuant to their agreement, Anderson pays Total $300 per file when the loan closes and nothing for files that do not close. Has Anderson committed a prohibited act that is a violation of RESPA? A. No, it is not a violation of RESPA to pay someone for services performed. B. No, it is not a violation because Anderson only pays when a file closes and they are separate companies. C. Yes, it is a violation because Anderson only pays when a file closes. D. Yes, it is a violation of RESPA because Total Processing, Inc. is not licensed.

A. No, it is not a violation of RESPA to pay someone for services performed. Section 8 of RESPA prohibits the giving or accepting a fee, kickback, or thing of value pursuant to an agreement or understanding (oral or otherwise), for referrals of business incident to or part of a settlement service involving a federally related mortgage loan. In this scenario, Anderson did not violate this prohibition as no referrals are occurring in exchange for the business given to Total. Paying for processing services actually performed is not a violation of RESPA.

Reilly, who is five months pregnant, tries to rent an apartment in a six-unit building with access to a shared swimming pool. The property manager rejects her application, citing insurance liability concerns of having small children in the building. Has this property manager violated the federal Fair Housing Act? A. Yes, discrimination based on familial status was a factor in the manager's decision. B. No, the Federal Fair Housing Act doesn't apply to discrimination by apartment managers. C. No, residential buildings with six units or less are exempt from the federal Fair Housing Act. D. No, safety is a legitimate reason for rejecting a rental applicant.

A. Yes, discrimination based on familial status was a factor in the manager's decision. Yes, the property manager committed a violation. A woman who is pregnant is considered part of the familial status protected class. Unless the exemption criteria are met, it is unlawful to discriminate based on the fact that Reilly will soon have a child living with her.

The unlawful act of steering is A. channeling buyers to or away from certain neighborhoods based on their race or ethnic background. B. use of voluntary reconveyance or friendly forfeiture to avoid judicial foreclosure. C. charging a greater rate of interest on a mortgage loan than the law allows. D. refusal to make loans on property in certain neighborhoods for discriminatory reasons.

A. channeling buyers to or away from 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 or away from certain neighborhoods based on their race, religion, or national origin.

Fair lending and housing laws set forth requirements that ensure lenders treat applicants fairly and equally. Under laws related to fair lending and fair housing, which is legal? A. disregarding income that cannot be verified B. subjecting applicants to more extensive credit checks because of race, sex, or national origin C. creating and promoting a racially or ethnically exclusive lending image D. refusing to include child support payments and state aid as viable income

A. disregarding income that cannot be verified It is not illegal to disregard income that cannot be verified. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in granting credit and prohibits a creditor from discouraging someone from applying for a loan on the basis of sex, age (provided the applicant has the legal capacity to contract), marital status, race, color, religion, national origin, receipt of public assistance, and exercised rights under the Consumer Credit Protection Act. A lender may consider income adequacy, sufficient net worth, job stability, and credit rating when making a decision to grant credit. The Fair Housing Act prohibits discrimination in housing based on race, color, religion, sex, national origin, disability, or familial status in the sale or lease of residential property.

Which of the following is not a permissible purpose for requesting a consumer report from a consumer reporting agency? A. medical transaction involving the consumer B. credit transaction involving the consumer C. employment involving the consumer D. lease transaction involving the consumer

A. medical transaction involving the consumer Medical transactions are not a permissible purpose for requesting a credit report.

Which is least likely to be an indication that the prohibited act of property flipping may be taking place? A. purchasing and remodeling a house and selling it for quick profit B. a series of sales and quick resales C. a group of sellers and buyers changing ownership of one property among them D. an inflated appraisal

A. purchasing and remodeling a house and selling it for quick profit Purchasing and remodeling a house and then selling it for a quick profit is an appropriate use of property flipping, which is perfectly legal. The illegal side of flipping is when colluding parties profit from the sale of property with an illegally inflated appraisal that supports a loan. It may involve a series of sales and quick resales, with one property and a group of sellers and buyers changing ownership among them.

According to the Fair Housing Act, the Equal Housing Opportunity logo must be used in all advertising of A. residential real estate for sale, rent, or financing. B. residential and commercial real estate for sale or financing. C. residential real estate for sale or financing. D. residential and commercial real estate for sale, rent, or financing.

A. residential real estate for sale, rent, or financing. According to the Fair Housing Act, the Equal Housing Opportunity logo must be used in all advertising of residential real estate for sale, rent, or financing.

In a fraud for property scheme, it is likely that A. the borrower seeks real estate ownership. B. a group of individuals are colluding to gain from the scheme. C. illegal property flipping occurs. D. the borrower doesn't intend to repay the loan.

A. the borrower seeks real estate ownership. In fraud for property, it is likely that the only perpetrator is the borrower who seeks property. In general, this fraud involves a single loan in which the borrower intends to repay but has intentionally misrepresented or omitted material facts from his loan application so that he will be approved for the loan.

When a lender's advertisement offers a certain product, service, or loan, the product, service or loan must be made available A. to a reasonable amount of qualified applicants. B. to no party if the advertisement stated all "rates and programs to change without notice." C. for ten business days. D. to all applicants, regardless of their credit characteristics.

A. to a reasonable amount of qualified applicants. In compliance with federal law, products, services, and loan terms advertised must be available to a reasonable amount of qualified applicants for a reasonable amount of time.

The Equal Credit Opportunity Act (ECOA) sets forth provisions that ensure lenders are fair in their treatment of mortgage loan applicants and borrowers. Under the protections offered by ECOA, how is the lender to ask about an applicant's marital status? What is your marital status? Are you married, unmarried, or separated? Are you single, married, or widowed? Are you married or divorced?

Are you married, unmarried, or separated? To ensure lenders are perceived as fair and ethical when taking a mortgage loan application, the best way to inquire as to an applicant's marital status is to ask: Are you married, unmarried, or separated?"

Federal and state laws prohibit licensed MLOs from certain acts. Which of the following is NOT one of these prohibited acts? A. MLO Radar conducts business with a known unlicensed broker. B. MLO Hawkeye disburses the mortgage loan proceeds into a customer's account via direct deposit. C. MLO Margaret imposes a charge on a borrower for establishing an escrow account. D. MLO Frank accepts a deposit to induce the lender to produce a loan.

B. MLO Hawkeye disburses the mortgage loan proceeds into a customer's account via direct deposit This question is asking "what is permissible?" Hawkeye's act of disbursing mortgage loan proceeds via direct deposit to the customer's account is permissible. The other choices describe acts that are prohibited under state rules and regulations

MLO Portia takes an application for an owner-occupied property. Soon thereafter, she discovers that the borrower's actual intention is for the property to be a rental property. What is the BEST action for Portia to take? A. She should refuse to process the loan. B. She should talk to her manager and the underwriter about what she's discovered. C. She should submit the loan file to the underwriter because this information does not impact the loan decision. D. She should allow the loan to close and then refinance it as an investment property.

B. She should talk to her manager and the underwriter about what she's discovered. The best answer, in this case, is that Portia should talk to her manager and/or the underwriter about what she's discovered. Since this could be a case of fraud or just a misunderstanding, it will be up to the manager and underwriter to determine occupancy, intent, and potential fraud and decide on a course of action.

Which of the following is LEAST likely to be a red flag that fraud is occurring? A. key information left blank on a Closing Disclosure B. derogatory information on a credit report C. the concealment of the source of the borrower's down payment D. mismatched documents provided for verification

B. derogatory information on a credit report The fact that an applicant has derogatory information on a credit report is not a red flag for mortgage fraud. The other activities may be red flags that mortgage fraud is being committed.

The Equal Credit Opportunity Act (ECOA) sets forth provisions that ensure lenders are fair in their treatment of mortgage loan applicants and borrowers. Under the protections offered by ECOA, when is it acceptable to discourage a borrower from making a formal loan application because the borrower receives public assistance? A. when the credit score is below 580 B. never C. when the loan size makes it a nonconforming loan D. when the income is below the poverty line

B. never Under the Equal Credit Opportunity Act, no applicant may be discouraged from making a formal loan application due to the fact that the applicant receives public assistance.

Emily, the real estate agent in a purchase transaction, tells the MLO arranging financing, in confidence, that her seller has agreed to hold a fixed-rate second mortgage (to be filed after the closing) as a portion of the purchase price, which was not disclosed in the mortgage application. Knowing this information now, what is the BEST course of action for the MLO? A. report the incident to local authorities B. refuse to process the loan C. process the loan as this information is irrelevant to the transaction D. ignore the information if Emily has the proper documents at closing

B. refuse to process the loan Not disclosing a known second mortgage is a fraudulent act of omission; therefore, in this case, the best correct answer is that the MLO needs to refuse to process or decline the loan. To process or originate the loan knowing this information is aiding and abetting an act of fraud and the MLO may be found guilty of collusion for ignoring the known information. Additionally, the MLO needs to talk to his supervisor or internal compliance officer about what he has discovered. The supervisor or internal compliance officer can then determine if a SAR needs to be filed and/or a state regulatory authority contacted.

When an appraiser gives a mortgage loan originator "what's needed" on the appraisal report, the consumer usually ends up A. not being able to sell the property. B. using too much of the equity tied to the property. C. refinancing the property. D. paying more discount points at closing.

B. using too much of the equity tied to the property. The cooperation between the appraiser and the loan originator in giving "what's needed" on the appraisal report leads to the consumer using too much equity tied to property; possibly such that the amount owed on the property exceeds the property's value.

As set forth by the Telemarketing Sales Rule, when required advertising disclosures are oral, clear, and conspicuous means all of the following EXCEPT A. at an understandable speed and pace. B. within a reasonable time frame. C. in the same language(s). D. in the same tone and volume as the sales offer(s).

B. within a reasonable time frame. The Truth in Lending Act (TILA) contains very specific requirements for clearly and conspicuously advertising the terms of a mortgage loan so that it is not deceptive or misleading. When disclosures are given orally, the Telemarketing Sales Rule sets forth that clear and conspicuous means at an understandable speed and pace, in the same language(s), and in the same tone and volume as the sales offer(s) so that ordinary consumers can easily hear and understand it.

_____ is when a real estate agent solicits homeowners to sell property cheaply because of the fear of people of another race or class moving into the neighborhood and then profiting by reselling at a higher price. Fraud Redlining Blockbusting Steering

Blockbusting Blockbusting is the prohibited real estate practice of convincing homeowners to sell their homes for less than the home is worth by telling them that people who are members of a particular race, religion, or national origin are moving into their neighborhood and will cause a decline in the value of their property. The homes are then resold for a profit at inflated prices. Blockbusting, also known as panic selling, is prohibited under the federal Fair Housing Act.

Which is an example of steering? A. Seller Tami tells her listing agent to find only Indian buyer prospects. B. Agent Tina tells homeowners that their property values will drop when a family from another country moves in. C. Property manager Teri suggests Tim would be happier in a more diverse community. D. Mortgage banker Todd refuses to make loans for a particular inner-city neighborhood.

C. Property manager Teri suggests Tim would be happier in a more diverse community. Steering as prohibited by the Fair Housing Act is the discriminatory practice of channeling buyers to or away from certain neighborhoods based on their race, religion, or national origin. Teri is committing the illegal act of steering.

Which of the following must NOT specifically be considered as part of the underwriting analysis for a mortgage loan? A. Does the loan transaction conform to lender loan policy? B. Have the applicants demonstrated the ability and willingness to repay the proposed mortgage? C. What is the history of the performance of properties sold in this geographic area? D. Is the collateral sufficient to secure the proposed mortgage loan?

C. What is the history of the performance of properties sold in this geographic area? It is illegal for lenders to consider the loan performance of specific geographic locations. They must lend to credit-worthy and qualified borrowers in any geographic area; to do otherwise might be considered prohibited redlining.

Before an MLO can send documents to a customer electronically, permission must be obtained by the customer. Which of the following is the MOST acceptable method/s for obtaining consent and confirmation that a customer can access electronic documents? A. by any electronic method B. by any method, as long as there is a signature C. by the electronic method for which the consumer will access documents D. by either an electronic method or verbal method

C. by the electronic method for which the consumer will access documents To ensure a consumer can communicate electronically with the financial institution to which consent has been provided, the Electronic Signatures in Global and National Commerce (E-Sign) Act requires that the consumer provide consent electronically "in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent."

A straw buyer is someone who A. uses fraudulent income data on a loan application to get a larger loan. B. defaults on a mortgage and then abandons the property. C. fraudulently allows his name and information to be used to obtain a mortgage but does not intend to live in the house. D. applies for loans from multiple lenders for the same property.

C. fraudulently allows his name and information to be used to obtain a mortgage but does not intend to live in the house. A straw buyer involves a third party who allows his/her name and identity to be used for the purpose of purchasing or refinancing a property.

Becky, a mortgage broker, referred her client to A&A Title, a company that both she and her husband John own. For this referral to be ethical and legal, Becky must A. not provide the referral because it is prohibited by RESPA. B. disclose the affiliation only if the client chooses A&A Title. C. give full disclosure to the client at, or prior to, the time the referral is made of the affiliation. D. also provide a list of alternative title companies to the client.

C. give full disclosure to the client at, or prior to, the time the referral is made of the affiliation The Real Estate Settlement Procedures Act (RESPA) requires a lender to provide an Affiliated Business Agreement disclosure when the lender owns greater than 1% of the referred provider or has a personal interest in the provider. The Affiliated Business Arrangement Disclosure form must be provided to the consumer at the time of the referral or before.

Per the Equal Credit Opportunity Act (ECOA), it is unlawful and unethical to discriminate in lending practices by refusing to grant a loan or altering the terms of a loan because of a borrower's A. source of down payment funds via gift from minority parents. B. occupancy status of a single borrower. C. membership in a protected class. D. employment status or continuance or income.

C. membership in a protected class. The ECOA, implemented through Regulation B, prohibits discrimination in granting credit to people based on the protected classes of sex, age, marital status, race, color, religion, national origin, or receipt of public assistance.

What is the primary purpose of the Fair and Accurate Credit Transactions Act? A. regulate credit bureau reporting obligations B. ensure that consumers' credit information is accurately maintained and recorded C. protect consumers from identity theft D. prevent the funding of terrorist operations

C. protect consumers from identity theft The primary purpose of the Fair and Accurate Credit Transactions Act (FACTA or FACT Act) is to protect consumers from identity theft by ensuring that consumers' credit information is securely maintained and disposed of.

XYZ Mortgage Servicing Company has a legal and ethical responsibility to protect consumer information. Under the Gramm-Leach-Bliley Act, what information IS EXEMPT from the nonpublic personal information sharing requirements? A. income information a consumer includes in a credit application B. a consumer's credit score a loan originator gets from the credit bureau C. the loan amount that appears on a recorded mortgage D. a bank customer's account balance

C. the loan amount that appears on a recorded mortgage Within the Gramm-Leach-Bliley (GLB) Act, the Financial Privacy Rule governs the collection and disclosure of customers' personal financial information, known as nonpublic personal information, by restricting when and under what circumstances such information may be disclosed to affiliates and nonaffiliated third parties. Information that the company believes to be lawfully public - such as mortgage loan information in a jurisdiction where that information is publicly recorded - is not restricted by the GLB Act. The sharing of the other information listed is restricted by the GLB Act.

If a consumer feels she has been discriminated against based on membership in a protected class under the Equal Credit Opportunity Act, she can go to the _____ to file a complaint. NMLS HUD CFPB or appropriate state civil agency as directed USPAP

CFPB or appropriate state civil agency as directed The Consumer Financial Protection Bureau (CFPB) and appropriate state agencies are the resource for Equal Credit Opportunity Act (ECOA) complaints.

When a Loan Estimate is provided to a borrower, it will be considered to have been provided in good faith if the actual closing costs are lower as shown on the borrower's Closing Disclosure. Good Faith Estimate. HUD-1 Settlement Statement. Closing Addendum.

Closing Disclosure. When the closing costs disclosed to the borrower on the Closing Disclosure are lower than the costs provided on the Loan Estimate, the MLO is considered to have acted in good faith in terms of the fees disclosed on the Loan Estimate.

Mortgage broker Cindy's customer purposely does not tell her that he just co-signed his nephew's auto loan. The credit report shows neither that loan nor a credit inquiry, and so that debt is not considered when Cindy gets him pre-approved for a larger mortgage than he really should have. Do you think Cindy did anything wrong? A. Yes, she committed constructive fraud by not confirming the customer's debts. B. Yes, she colluded with the customer to withhold material information. C. Yes, she committed actual fraud by approving a purposely false application. D. No, she can't be held responsible if a client withholds information that does not show on his credit report.

D. No, she can't be held responsible if a client withholds information that does not show on his credit report. No, Cindy did nothing wrong. Cindy's customer does not inform Cindy of his fraudulent omission. Since Cindy is unaware of the omission when she gets him pre-approved, she is relieved of her responsibility in this fraud scheme.

Vincent Collins is head of The Family Mortgage Corp. Two of his sons, Michael and Sonny work for the business as licensed mortgage loan originators. His third son, Fred, is not licensed and processes loans for the business. Which of the following would be illegal for Fred to do? A. speak to a borrower regarding information appearing on her paystub B. call a borrower's employer to verify employment C. talk about the family business with anyone outside the family D. advise a borrower who applied for a loan to get a fixed-rate loan rather than an ARM

D. advise a borrower who applied for a loan to get a fixed-rate loan rather than an ARM It is illegal for an individual who is not licensed as an MLO to advise a borrower regarding mortgage loan options. The other actions are legal for a loan processor working for a mortgage company who is not a licensed MLO.

The Closing Disclosure includes several required loan disclosures. Which of the following is NOT one of the loan disclosures that a lender provides on a Closing Disclosure? A. demand feature of the loan B. late payment feature of the loan C. assumption rights of lender if property is sold or transferred D. right of lender to change the loan interest rate

D. right of lender to change the loan interest rate The Closing Disclosure includes several loan disclosures including the assumption rights of lender if property is sold or transferred; loan demand, late payment, negative amortization, and partial payment features; and if an escrow account will be tied to the account. The Closing Disclosure does not disclose the right of lender to change the loan interest rate.

To provide a revised Loan Estimate that can be used in determining good faith, a changed circumstance can be any of the following EXCEPT A. there is new information regarding the borrower that the MLO did not rely on when providing the original Loan Estimate. B. information that was known or provided at the time of application changed after the application, altering the interest rate of the loan. C. an event occurred that is beyond the control of the creditor or borrower. D. the MLO neglected to inform the borrower and include the additional cost necessitated by a review appraisal.

D. the MLO neglected to inform the borrower and include the additional cost necessitated by a review appraisal. If there is no change in circumstance and a fee was not included on the Loan Estimate due to an MLO error, a revised Loan Estimate cannot be provided for the purpose of determining good faith.

If expired mortgage loan files for borrowers are disposed of in a dumpster at the back of the company's office, the company has violated the consumer-protection requirements set forth by FACTA. RESPA. ECOA. HMDA.

FACTA. The Fair and Accurate Credit Transactions Act (FACT Act or FACTA) requires that borrower's information is disposed of in a manner that protects the data. Reasonable methods for security and disposal include burning or shredding papers that contain consumer report information so that information cannot be reconstructed; destroying or erasing electronic files or media so that information cannot be recovered or reconstructed; and placing all pending loan documents in locked desks, cabinets, or storage rooms at the end of the workday.

The _____ specifically prohibits the free exchange of nonpublic information between consumers' creditors Gramm-Leach-Bliley Act Fair Credit Reporting Act Equal Credit Opportunity Act Truth in Lending Act

Gramm-Leach-Bliley Act Within the Gramm-Leach-Bliley Act, the Financial Privacy Rule governs the collection and disclosure of customers' personal financial information, known as nonpublic personal information, by restricting when and under what circumstances such information may be disclosed to affiliates and nonaffiliated third parties.

____ is when someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception. Credit stealing Information pilfering Identity theft Spamming

Identity theft Identity theft is all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain. Lenders have an ethical responsibility to take precautions to secure borrower information to avoid the theft of personal information.

____ most commonly commit mortgage fraud for profit. Industry insiders Consumers Government officials Investors

Industry insiders The increased reliance by financial institutions and others on third-party mortgage brokers has resulted in mortgage fraud at a high level, especially fraud for profit committed by industry insiders.

The Fresh Start Company is anxious to work with homeowner, Julia, to obtain a loan modification that will help her avoid foreclosure. Fresh Start asks Julia for an advance fee to start the process. Fresh Start has violated the _____ with this advance fees request. MARS Rule Loan Originator's Compensation Rule Red Flags Rule Ability to Repay Rule

MARS Rule The Federal Trade Commission (FTC), the nation's consumer protection agency, issued Mortgage Assistance Relief Services (MARS) Rule. The MARS Rule prohibits the collection of money from a customer unless the customer has received and agreed to a written offer of mortgage relief from the consumer's lender or servicer.

The FBI compiles data on mortgage fraud through NAMP. MARI. SARs. LARs.

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

When a person receives an electronic funds transfer transaction aggregating more than $5,000 and suspects that money laundering is behind the transaction, what report needs to be filed? Currency and Monetary Instrument Report (CMIR) Financial Center Investigative Inquiry Report (FCIIR) Suspicious Activity Report (SAR) Currency Transaction Report (CTR)

Suspicious Activity Report (SAR) As set forth by the Bank Secrecy Act/Anti-Money Laundering Act, a Suspicious Activity Report (SAR) must be filed for electronic funds transfer transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act.

Mortgage companies are required to report any attempted fraud that occurs within their organization. Attempted fraud is reported by submitting a ______ to the Federal Financial Institution Examination Council (FFIEC). These reports are then reviewed and the information is reported to the institution's regulator. Currency and Monetary Instrument Report (CMIR) Financial Center Investigative Inquiry Report (FCIIR) Currency Transaction Report (CTR) Suspicious Activity Report (SAR)

Suspicious Activity Report (SAR) Mortgage lenders, including those that are not banks, are required to report any attempted fraud that occurs within their organization. This report, called a Suspicious Activity Report or SAR, is completed by the institution and sent to the Federal Financial Institution Examination Council (FFIEC). These reports are then reviewed and the information is reported to the institution's regulator.

To ensure a loan closes, a mortgage loan originator conceals the fact that the down payment is made with borrowed funds. This could be considered actual fraud. constructive fraud. good business. negligent misrepresentation.

actual fraud Actual fraud is the intentional misrepresentation or concealment of a material fact. If the MLO decided to ignore a critical fact, he could be accused of actual fraud.

Mortgage companies need to establish internal policies that comply with the Telemarketing Sales Rule. If a customer's name is on the National Do Not Call Registry and that customer closes a loan with the company, the company must stop contacting the customer to solicit new business after three months. after 18 months. immediately. after one year.

after 18 months. A company may call a customer with whom they have an established business relationship (EBR) up to 18 months after the customer's last transaction or payment, even if the customer's name is on the National Do Not Call Registry. Note, however, that if a customer has asked to be put on the company's internal Do Not Call list, the company may not call, even if there is an EBR.

A(n) ___ loan is BEST defined as a loan that is a total fabrication used in a mortgage loan fraud scam. false air disappearing silent second

air An air loan is a loan that is a total fabrication, with fictional property as non-existent collateral, fictional buyers, or straw buyers.

To comply with Regulation Z, lenders have an ethical and legal responsibility to disclose the ______ on the Loan Estimate. tax rate advertised rate annual percentage rate initial rate

annual percentage rate The annual percentage rate (APR) as a composite rate is designed to let consumers comparison shop for rates among lenders since all lenders must calculate APR the same way. Regulation Z requires the APR disclosure on the Loan Estimate.

For a Loan Estimate to be seen as provided in good faith, what cost cannot change from the Loan Estimate to the Closing Disclosure? settlement agent fee pest inspection report fee government recording charges application fee paid to lender

application fee paid to lender Transfer taxes and any charge paid to the lender, mortgage broker, or their affiliates for the origination, processing, and closing of a mortgage loan must not change from the Loan Estimate disclosure to the Closing Disclosure.

Mortgage broker Helen places an ad indicating a 5% interest rate for qualified applicants. Marshall meets the criteria to qualify at that rate, but Helen talks him into a less appropriate product, which results in a higher fee for her. This is an example of what sort of prohibited advertising tactic? ponzi scheme loan flipping bait-and-switch extortion

bait-and-switch The bait-and-switch tactic is advertising without the intent to provide the named service or product but, rather, to lure a person into making an application and then switch the person from obtaining the advertised services or product to other or different services or products on a basis more advantageous to the advertiser. If Helen teased the consumer with the rate in the ad to get him in the door and then sells him on a different product that is not better for him but that costs more, she could be accused of using an illegal bait and switch tactic.

Inducing owners to sell homes by suggesting the neighborhood's ethnic or racial composition is changing, with the implication that property values will decline, is a prohibited act called flipping. counseling. blockbusting. redlining.

blockbusting Blockbusting is the prohibited real estate practice of convincing homeowners to sell their homes for less than the home is worth by telling them that people who are members of a particular race, religion, or national origin are moving into their neighborhood and will cause a decline in the value of their property. The homes are then resold for a profit at inflated prices. Blockbusting, also known as panic selling, is prohibited under the federal Fair Housing Act.

Who is typically the perpetrator in a fraud for property scheme? appraiser seller lender borrower

borrower The perpetrator in a fraud for property scheme is usually the borrower. Typically, no industry insider is directing the illegal activity. Therefore, the borrower is the one with the agenda and the one who hopes to gain from the fraud.

Real estate agent Kevin tells mortgage broker Lisa that he will send her all of his clients if she'll give him $100 for each loan she closes. Although Lisa turns him down, she does decide to send Kevin a bottle of wine each time he sends a client to thank him for referring his clients anyway. According to Section 8 of RESPA, both Lisa and Kevin committed a prohibited act. only Lisa committed a prohibited act. only Kevin committed a prohibited act. neither Lisa nor Kevin committed a prohibited act.

both Lisa and Kevin committed a prohibited act. Section 8 of RESPA prohibits the giving or accepting a fee, kickback, or thing of value pursuant to an agreement or understanding (oral or otherwise), for referrals of business incident to or part of a settlement service involving a federally related mortgage loan. RESPA considers anyone who initiated, paid, or accepted a prohibited kickback to be in violation.

Each of the following sources of income must legally and ethically be used as part of the income calculation used for mortgage loan qualification EXCEPT rental income. W-2 income. income from a second job. child support that ends in a year.

child support that ends in a year. Child support can only be counted toward a borrower's income if it will continue for three years or longer.

The Fair Housing Act requires the use of what slogan by creditors in all broadcast advertising? fair housing opportunity equal housing opportunity fair housing lender equal housing lender

equal housing lender The Fair Housing Act requires the specific phrase "equal housing lender."

Intentional or negligent misrepresentation or concealment of material facts is unethical and is most likely an example of fraud. redlining. predatory lending. prohibited loan flipping.

fraud Fraud is intentional or negligent misrepresentation or concealment of material facts. Fraud also includes actively concealing information and making false or misleading statements.

When a borrower commits fraud in an effort to obtain ownership of a property, it is commonly referred to as fraud for property. a straw-buying scheme. a foreclosure scam. fraud for profit.

fraud for property When a borrower commits fraud in an effort to obtain ownership of a property, this is considered fraud for property.

Which of the following income source can a lender NOT use as part of the income calculation used for loan qualification? income from a raise expected within a year investment income disability payments Social Security payments

income from a raise expected within a year The Equal Credit Opportunity Act requires that all current sources of income be allowed and that the likelihood that the income will continue for an acceptable period of time can be the only consideration. Future income can never be considered. Disability income can be used as long as there is documentation it will continue for at least three years. Social Security payments are considered income if the borrower receives permanent Social Security benefits. If Social Security is permanent income for a buyer who has reached retirement age, it will count.

The difference between actual fraud and constructive fraud is that actual fraud involves negligence. requires the commission of a crime. is prohibited. is intentional.

is intentional Constructive fraud is generally due to negligence, while actual fraud requires intent to misrepresent or conceal material facts which are known. Both are prohibited.

Ted, a mortgage broker, convinces Alice to refinance her home again, promising her a lower interest rate. Afterward, Alice realizes no benefit. In fact, her interest rate went up. This is an example of the prohibited and illegal act of property flipping. home flipping. loan flipping. equity flipping.

loan flipping Prohibited loan flipping involves refinancing over and over again, usually with no benefit to the borrower in terms of lowering the interest rate or saving fees. The borrower is promised benefits that never materialize and ultimately have little/no equity built up.

A prohibited activity that involves homeowners who are encouraged to refinance their property over and over until little or no equity remains is known as blockbusting. property skimming. panic lending. loan flipping.

loan flipping Prohibited loan flipping involves refinancing over and over again, usually with no benefit to the borrower in terms of lowering the interest rate or saving fees. The borrower is promised benefits that never materialize and ultimately have little/no equity built up. Each time they refinance, they are charged points and closing costs, along with other fees. And each time, the equity gets smaller.

According to the Interagency Guidance on Nontraditional Mortgage Products, inducing a borrower to repeatedly refinance a loan in order to charge points and fees, although a net tangible benefit could have been achieved in a single transaction is an example of predatory lending. This predatory practice is commonly known as illegal loan flipping. redlining. blockbusting. steering.

loan flipping. This practice is known as loan flipping.

The Loan Originator Compensation Rule, as implemented by Regulation Z (Section 36), sets forth that a mortgage broker is prohibited from compensating an employed MLO based on long-term loan performance. loan program type. overall loan volume. a flat fee fixed in advance.

loan program type Compensation can be based on any of the following triggers: Flat fee fixed in advance, hourly rate for time worked, overall loan volume, long-term loan performance, existing/new customer, and pull-through rate; i.e., quality of loan files. An MLO cannot be compensated for loan origination activities based on the loan type or any loan term other than the loan amount. The interest rate or program type of the loan must never be a basis for compensating an MLO.

Alexa's loan applicant calls her late in the evening before the closing, informing her he is being laid off the following Monday. All the loan papers are at the title company and the Closing Disclosure is approved. The buyer still wants the home. Alexa decides to let the loan close. What type of fraud is this? material misrepresentation material omission material misstatement fraud by deception

material omission By Alexa not alerting the lender/underwriter that the borrower has had a change of employment status, she has committed the fraudulent act of material omission.

A claim in any medium that gives the consumer an incorrect understanding of the service or product he is interested in obtaining BEST defines the term misleading advertising. bait and switch advertising. fraudulent advertising. unfair advertising.

misleading advertising. Misleading advertising means a claim in any medium that gives the consumer an incorrect understanding of the service or product he is interested in obtaining.

What type of property is involved in the air loan fraud scheme? residential non-existent mixed-use commercial

non-existent An air loan is a loan that is a total fabrication, with fictional property as non-existent collateral, fictional buyers, or straw buyers.

XYZ Mortgage Company makes a loan to Jaya knowing that she is unlikely to be able to repay it and anticipating that they'll eventually foreclose and obtain some equity. This is an example of secondary lending. predatory lending. prime lending. subprime lending.

predatory lending. According to the Interagency Statement on Subprime Mortgage Lending, extending credit to people with little or no income and who have little chance of repaying the loan so the lender can foreclose on the property and keep the excess equity to cover costs is considered predatory lending.

Sue faces possible foreclosure and contacts a mortgage lender whose ad promises to save her home for her. At closing, Sue sees that the lender changed the terms of the loan that they had agreed to, but she felt she had no choice but to go ahead with the loan or lose her house. This is an example of negative amortization. affinity marketing. loan flipping. predatory lending.

predatory lending. Predatory lending involves originating loans that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower, and other prohibited acts. In this predatory lending example, the consumer was under duress and the lender took advantage of it by changing the loan terms.

As protection against predatory lending practices, the Home Ownership and Equity Protection Act places limitations on ______that may lock consumers into loans that may not be, or are no longer, in their best interest. refinancing fees prepayment penalties closing fees lock-in agreements

prepayment penalties The Home Ownership and Equity Protection Act (HOEPA) places limitations on prepayment penalties that may lock consumers into loans that may not be, or are no longer, in their best interest.

Which is LEAST likely to be an indicator of predatory lending? requiring mortgage insurance charging excessive prepayment penalties increasing interest charges on late loan payments assets listed on application not verified

requiring mortgage insurance Predatory lending involves originating loans that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower, and other prohibited acts. Requiring mortgage insurance does not indicate predatory lending. The other choices are indicators of predatory lending.

Sharon, a buyer, agrees to pay full price for a home. She doesn't have the money for a down payment, so she and the seller agree to an undisclosed second mortgage that equals the amount of the desired down payment. This mortgage scheme is known as silent second. equity skimming. illegal flipping. double sold.

silent second A silent second is an unrecorded second mortgage fraud scam in which a buyer pays full price for the property. Since the buyer does not have money for a down payment, the seller agrees to an unrecorded second mortgage or a seller-paid concession outside of the closing in the desired down payment amount.

Mortgage broker Faith recruits her cousin Hope, who has great credit, to apply for a mortgage on the property, even though Hope is moving to Canada and has no intention of paying off the loan. In this case, Hope is called a ________ buyer. straw negligent arm's length collateral

straw A straw buyer involves a third party who allows their name and identity to be used for the purpose of purchasing or refinancing a property. Mortgage insiders like Faith commit mortgage fraud when they knowingly make loans to straw buyers who will not use the home as their residence.

To address the problem of illegal property flipping, appraisers must analyze the transfer history of a subject property for the previous three months. one year. three years. eighteen months.

three years Appraisers are required to analyze the purchase contract, current listing, and recent prior sales for the past three years. The URAR form asks for research of the subject's transfers from three years prior to the effective date of the appraisal.

Seller Fred knows that he has an outstanding lien on his property, so he pays one of the professionals involved in the transaction to ignore it so the loan can close. Who did Fred most likely involve in his mortgage fraud scheme? title company buyer appraiser real estate agent

title company The title company typically researches the status of a title including all public records and liens against it. If the title company intentionally leaves the lien off the title report, the other parties to the transaction may not know about it and, therefore, be innocent of any attempted fraud.