Mortgage Loan Origination - ProSchools - Loan Fraud
Air Loans
(i.e., loans secured by nonexistent property ["air"], leaving the lender without collateral): The schemer invents borrowers and properties, establishes fake accounts for payments, and maintains custodial accounts for escrows. He may even set up an office with a bank of telephones for verification purposes, with each phone representing the employer, appraiser, credit agency, etc.
Which government agency is responsible for administering BSA?
. FinCEN is responsible for administering the BSA.
Silent second:
A primary lender grants a loan to a borrower who the lender believes has invested his own money in the down payment and closing costs. However, the borrower has actually borrowed the needed funds from the seller secured by an undisclosed and unrecorded (i.e., silent) second mortgage.
Fraud for property
Buyer lies about income in order to qualify , he might sale the property for a profit Altering the applicant's credit history Concealment of liabilities (i.e., the loan applicant fails to fully disclose his debts) Use of a straw buyer (i.e., a person who purchases the property or applies for the loan in his own name for the actual borrower and is typically paid for the use of his personally identifying information)
Mortgage fraud may be investigated by
FBI, HUD OIG IRS , postal inpection service and local agencies
Asset fraud
Failing to disclose the use of a credit card (an unsecured loan) advance as the source of a down payment Overstating assets for a down payment or collateral for the loan Claiming a loan for the down payment as a gift, with use of a fraudulent gift letter Claiming payment of an earnest money deposit that does not exist
Title 18 of the United States Code specifies jail terms and fines for the following crimes associated with mortgage loan fraud:
For fraud/false statements, up to five years in jail and/or a $100,000 fine For a false mortgage loan application, conspiracy to commit fraud, fraud/swindles or bank fraud, up to 30 years in jail and/or a $1 million fine
MARS
Mortgage Assistance Relief Services Rule
Income and employment fraud:
Overstating income and/or place or length of employment Reporting fictitious employment and/or other sources of income with verification provided by co-conspirators Lumping part-time income, bonuses and sporadic income in with salaried income
Driving by the property but not actually inspecting its condition is termed a windshield appraisal. a coerced appraisal. an evaluation compliance review. a review appraisal.
The correct answer is A. A windshield appraisal is done by driving past the property without actually inspecting its condition.
The MARS Rule prohibits certain activities when a mortgage assistance relief services provider is involved in assisting a consumer with a short sale. The following are all prohibited EXCEPT providing proper disclosures to customers. collecting an advance fee. making false statements related to the payoff of the mortgage loan. assisting a provider who is in violation of the Rule.
The correct answer is A. It is prohibited for a mortgage assistance relief services provider to collect advance fees, make false or misleading statements and provide substantial assistance to a provider who is in violation of the Rule. A provider must, however, provide proper disclosures to consumers when engaging in mortgage relief services.
All of the following disclosures are required under the MARS Rule EXCEPT telling a consumer the upfront amount he will be charged for loan modification services used to assist him in avoiding foreclosure. telling a consumer there is no guarantee the lender will agree to modify the loan. telling a consumer the total amount he has to pay for services. telling a consumer that neither the government nor the consumer's lender has approved the mortgage relief services.
The correct answer is A. It is prohibited for a provider to charge upfront fees for loan modification services utilized for the purpose of avoiding foreclosure. Telling a consumer the amount of the fee to be incurred, that the provider's services have not been approved by the government or the consumer's lender, and that there is no guarantee the consumer's lender will agree to a modification are all required disclosures under the MARS Rule.
Mortgage assistance relief services include all of the following EXCEPT purchasing a home at a trustee sale. negotiating loan modification. negotiating a short sale. postponing foreclosure.
The correct answer is A. Mortgage assistance relief services include a "service, plan or program offered or provided to the consumer in exchange for consideration" that provides services in relation to a consumer's mortgage, such as negotiating a possible loan modification, modifying the consumer's payment arrangements or negotiating a short sale of a dwelling on behalf of a consumer. Buying a home at a trustee sale is not a mortgage relief service.
When must a Currency Transaction Report be filed? 5 days following the day on which the reportable transaction occurred 15 days following the day on which the reportable transaction occurred 90 days following the day on which the reportable transaction occurred 30 days following the day on which the reportable transaction occurred
The correct answer is B. A CTR must be filed within 15 days following the day on which the reportable transaction occurred. A copy must be retained by the institution for at least five years.
Which of the following describes the maximum penalty for submitting a false mortgage loan application? Prohibition from filing a new application for a mortgage loan for five years A $1 million fine and 30 years imprisonment License revocation with no right to apply for a new license for seven years A $10,000 fine and six months imprisonment
The correct answer is B. If there is an attempt to submit a fraudulent application for a federally related mortgage loan, the penalty can be a fine of up to $1 million and 30 years in prison.
The MARS Rule was issued in 2010 by the Board of Governors of the Federal Reserve. the Federal Trade Commission. CFPB. HUD.
The correct answer is B. In 2010 the Federal Trade Commission issued the Mortgage Assistance Relief Services Rule.
Under guidelines issued by the Federal Housing Finance Agency in 2012, if a seller makes a written offer to his lender to accept less than the amount owed on his mortgage, the lender must respond within how many days? 180 60 90 120
The correct answer is B. In November 2012, the Federal Housing Finance Agency implemented rules designed to streamline Fannie Mae and Freddie Mac programs dealing with short sales and other relief services. Among those are guidelines that require lenders and servicers to review and respond to a short sale offer within 30 days of receipt, provide updates if the offer remains under review past the initial 30-day period and provide a final decision to the borrower within 60 days.
Which of the following is a red flag for occupancy fraud in an application for a mortgage loan to be used to buy a primary residence? The purchase price for the property is higher than the listing price. The home being purchased is in the applicant's current neighborhood. Two friends are buying the property. The seller is reselling the property after owning it two weeks.
The correct answer is B. It is likely that an individual buying a home in the same neighborhood in which he currently lives will use one of the homes as a rental.
With respect to money laundering techniques, what is "placement"? The process of separating the criminal proceeds from their criminal origins using financial transactions in one or more accounts The process of introducing unlawful proceeds into the financial system Multiple transactions that are made by or on behalf of the same person designed to evade reporting requirements The process of combining criminal proceeds with legal funds to provide legitimate ownership
The correct answer is B. Placement is the process of introducing unlawful proceeds into the financial system.
Sally Jones is a licensed attorney assisting her client, Jacob Meyers, with negotiating a short sale with his lender. Sally is exempt from the provisions of the MARS Rule if she meets three conditions. Which of the following is not a condition that Sally must meet in order to be exempt? Sally must be a practicing attorney. Sally must complete one hour of continuing education each year related to mortgage assistance relief services. Sally must be in compliance with state laws and regulations that relate to the Rule. Sally must be licensed in the state where her client's home is located.
The correct answer is B. The MARS Rule provides for a general exemption for attorneys if they meet three conditions. The attorney must be engaged in the practice of law and licensed in the state where the consumer or dwelling is located. The attorney must also be in compliance with state laws and regulations governing conduct related to the Rule. An attorney may also be exempt from the ban on the collection of advance fees as long as he meets all of the conditions for the general exemption, deposits fees collected into a client trust account and abides by state laws and regulations covering such accounts.
Best Performance is a company that advertises its ability to assist with negotiating short sales for customers. In its advertisements, Best may indicate it has a direct affiliation with HUD. guarantee that lenders will accept its short sale offers. disclose its cancellation policy. guarantee the amount of money its customers will save by working with it.
The correct answer is C. A mortgage assistance relief services provider may not make false or misleading claims about its services, including claims related to having an affiliation with a government agency, the likelihood of a lender accepting a proposed offer, or the amount of money consumers will save by using its services. A provider must disclose its cancellation policies.
All of the following would be common activities in fraud for property EXCEPT asset fraud. income and employment fraud. flipping. silent second.
The correct answer is C. Flipping involves purchasing a property for a quick resale. Fraud for property generally involves one borrower obtaining one loan for housing for his personal use under false pretenses, such as a buyer claiming assets he does not have, income he does not earn or hiding the existence of a loan (silent second) for the down payment from the seller.
Carey Smith went to Prime Lending Services for assistance with his mortgage loan modification. Prime must disclose material information on any loan modification offered, including all of the following EXCEPT the principal balance. the number of payments on the loan. interest rates being offered by competitors. the duration of the loan.
The correct answer is C. If a consumer is given an offer of mortgage relief from his lender or servicer, he must be provided with a separate one-page written notice from the lender/servicer that explains all material differences between the offer of mortgage relief and the consumer's current loan. Such material information includes, but is not limited to, all loan terms and fees. Interest rates offered by other lenders are not a required disclosure.
Which of the following is required to be reported by the BSA?
The correct answer is C. In regards to using a Currency Transaction Report (CTR), BSA requires financial institutions to report single or structured currency transactions that exceed $10,000 to FinCEN.
What is required when a bank suspects that a $6,000 transaction is not typical for a particular customer? CTR CIP SAR AML Program
The correct answer is C. The BSA requires that financial institutions file a Suspicious Activity Report when transactions conducted or attempted total $5,000 or more and the bank knows, suspects, or has reason to suspect that the transaction may involve money laundering or other criminal activity, is designed to evade the BSA, has no business or apparent purpose and/or is not typical for the customer.
To whom does the MARS Rule apply? All nonprofit providers of mortgage assistance relief services Any person involved in the mortgage lending business All for-profit providers of mortgage assistance relief services All for-profit and nonprofit providers of mortgage assistance relief services
The correct answer is C. The MARS Rule applies to all for-profit providers of mortgage assistance relief services.
In order for an attorney to be exempt from the provisions of the MARS Rule, he must be affiliated with and working on behalf of the lender. specially authorized by the county clerk's office. engaged in the practice of law. licensed as a mortgage lender.
The correct answer is C. The MARS Rule provides for a general exemption for attorneys if they meet three conditions. They must be engaged in the practice of law, be licensed in the state where the consumer or dwelling is located, and be in compliance with state laws and regulations governing attorney conduct related to the Rule.
Jim Jackson has purchased an investment property through a foreclosure sale. The property currently has tenants occupying it. In taking title, Jim must acknowledge a junior lienholder's rights to collect from him any deficiency judgment owing. may evict the tenants no sooner than 30 days after the date of the sale. must honor the unexpired lease. may terminate the tenant's lease immediately.
The correct answer is C. The buyer of a foreclosed property must honor any tenant's unexpired lease. The junior lienholder would have to release his interests in a short sale but may pursue the seller (NOT the buyer) for a deficiency judgment.
The Smiths live in an apartment building and are on a month-to-month tenancy; their landlord wishes to terminate their tenancy as he has purchased the apartment complex through foreclosure. Under the federal Protecting Tenants at Foreclosure Act of 2009, what must the Smiths' landlord do in order to terminate the tenancy? He must give them 30 days' notice. He can terminate their tenancy as soon as the foreclosure sale is final. He must give them 90 days' notice. He must give them 60 days' notice.
The correct answer is C. Under the federal Protecting Tenants at Foreclosure Act of 2009, the purchaser of a foreclosed property in which a tenant resides must give the tenant notice to vacate in order to terminate any month-to-month tenancy. The notice must be given at least 90 days prior to its effective date.
All mortgage assistance relief services companies are required to provide consumers with certain disclosures. Among those is a disclosure that stopping mortgage payments could benefit the consumer's credit. indicating the company's success rate in securing loan modifications. of the likely new interest rate that a modification will achieve. that the lender may not agree to any modification of the consumer's loan.
The correct answer is D. A mortgage assistance relief services company must disclose the fact that the lender may not agree to any modification of the consumer's loan.
Dan Theman is a homeowner in imminent danger of defaulting on his mortgage loan. Susie Que is his mortgage broker. She is assisting Dan as he tries to obtain a loan modification. Susie must disclose to Dan certain information, including all of the following EXCEPT the total cost of her services. that he may stop using Susie's services at any time. that Dan's lender may not agree to modify his loan. Susie's endorsement by HUD.
The correct answer is D. A mortgage relief assistance services provider must make certain disclosures to consumers before it engages in mortgage relief activities. The provider must disclose the total cost of its services, that the consumer may discontinue working with the provider at any time, that the provider is not associated with a government agency or the consumer's lender and that the lender may not agree to a modification of the loan.
A person who purchases property or applies for a loan in his own name on behalf of the actual borrower is called a(n) flapper. flipper. identity thief. straw buyer.
The correct answer is D. A straw buyer is a person who purchases the property or applies for the loan in his own name, using his identification and qualifications, to enable the actual borrower to get the property.
A loan originator is told by a real estate licensee that the seller will take back a $50,000 note so the buyer will be able to buy the seller's $255,000 property with a $200,000 loan. When the loan originator asks for the terms of the note, the real estate licensee tells him to work with the title company closing the loan to create paperwork to make the transaction appear ordinary. In this situation, the loan originator should contact the broker who listed the property for sale to get a copy of the purchase and sales agreement. send the seller a letter by certified mail asking for an explanation of the loan terms. send the listing broker a letter by certified mail asking for an explanation of the loan terms. use due diligence to determine the facts and resolve the matter.
The correct answer is D. Failure to disclose the existence of a silent second to be held by the seller would amount to fraud against the lender. The loan originator cannot get involved in assisting the parties in this arrangement.
Financial institutions are prohibited from establishing, maintaining, administering or managing a correspondent account in the United States for or on behalf of car dealerships. foreign banks. domestic banks. foreign shell banks.
The correct answer is D. Financial institutions are prohibited from establishing, maintaining, administering or managing a correspondent account in the United States for or on behalf of a foreign shell bank. Covered institutions must also ensure that the accounts they maintain for foreign banks are not being used by that foreign bank to indirectly serve any foreign shell banks.
With respect to money laundering techniques, what is "layering"? The process of making multiple transactions that are made by or on behalf of the same person designed to evade reporting requirements The process of combining criminal proceeds with legal funds to provide legitimate ownership The process of introducing unlawful proceeds into the financial system The process of separating the criminal proceeds from their criminal origins using financial transactions in one or more accounts
The correct answer is D. Layering is the process of separating the criminal proceeds from its criminal origins using financial transactions in one or more accounts.
Under the MARS Rule, a provider must maintain records for at least two years from the date a record is originated. The retention rule covers all of the following documents EXCEPT customer communication. advertising records. sales records. continuing education records for the provider's employees.
The correct answer is D. The MARS Rule requires that mortgage assistance relief services providers maintain records for at least two years from the date a document is created, generated or received. Records that must be retained include advertising records, sales records, customer communications and agreements between the provider and consumers.
The MARS Rule requires that records be kept for how many years? Seven Three Five Two
The correct answer is D. The MARS Rule requires that mortgage assistance relief services providers maintain records for at least two years from the date the document is created, generated or received.
red flags
The lender is not provided with original documents within a reasonable time. One mortgage loan originator has originated an unusually high volume of loans with maximum loan-to-value limits. Numerous applications from a particular mortgage loan originator have unique similarities. A high volume of loans exists in the name of trustees, holding companies or offshore companies. An unusually large number of repurchases, foreclosures, delinquencies, early payment defaults, prepayments, missing documents, fraud, high-risk characteristics, quality control findings or compliance problems is noted on loans processed by a particular mortgage loan originator. An unusually large increase is noted in the overall volume of loans processed by a particular mortgage loan originator during a short time period.
"mortgage loan originator"
an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.
Lenders need adequate controls in place to ensure brokers are not compensated for incomplete or fraudulent mortgage ___.
applocations
Freddie Mac and Fannie Mae
are required to report suspicious mortgage fraud activity on a Mortgage Fraud Incident Notice (MFIN) to an examiner-in-charge.
The types of loan fraud most commonly involving mortgage loan originators are
broker-facilitated fraud, appraisal fraud and loan application fraud. Of these, the most common involves mortgage broker facilitation in misrepresenting, misstating or omitting information used to underwrite a loan.
The most common types of fraud relate to loan ___.
documentation
Recent law changes have increased mortgage brokerage standards for licensing and ___.
oversight
The MARS Rule
they promote services that will help homeowners avoid foreclosure.