Master Ethics NMLS

"Caveat emptor" means...

"Let the buyer beware". Common concept in ethical debate over whether mtg professionals should be agents for borrowers

Straw buyer is...

A person who accepts a fee for the use of his/her SSN and other personal information. (Often unaware they are liable for fraud)

How many days after receiving an adverse action notice does a consumer have to request a copy of the credit report on which the decision was based? A. 60 B. 7 C. 30 D. 14

A. 60 A adverse action notice is the notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.

Being convicted of a crime demonstrates A. A lack of competency to act as a mortgage banker B. Standard practice for a mortgage banker. C. None of the other options are correct D. An honest mistake. Yo

A. A lack of competency to act as a mortgage banker

Which of the following is a red flag in a real estate sale contract? A. A purchase price much higher than the listing price B. A purchase price much lower than the listing price. C. A very high down payment D. No real estate broker commission

A. A purchase price much higher than the listing price A sign of fraud on a sales contract is a purchase price that is higher than the listing price. Unless the market was very hot, offers would generally be less, not more than the offered price. The high offer could be an indication that the parties are falsifying the price in order to get financing that will cover some or all of the buyer's actual down payment.

Which of the following would be deemed A RESPA violation? A. A title insurance company paying $40 for referring clients. B. Paying money to an unlicensed buyer or seller C. Buyer requiring a specific lender D. Not discloseing to a buyer that the seller is insolvent and will sell for less

A. A title insurance company paying $40 for referring clients. RESPA makes it illegal for a title insurance company to pay a broker $40 (or any compensation) for referring clients to that title company.

Some common types of legal transactions that require appraisals are: A. All of the other options require appraisals B. Income tax casualty losses, estate or inheritance tax, and property settlement upon divorce. C. Damage lawsuits, loan foreclosures, and security for bail bonds. D. Company liquidation or merger, capital gains tax basis, and loan foreclosures.

A. All of the other options require appraisals The above items all require an appraisal.

A broker whose negligence in preparing a sales contract allows the purchaser to void the agreement breaches her duty to her client of: A. Due care. B. Accuracy. C. Personal performance. D. Honesty.

A. Due care. "Due care" refers to the licensee's obligation to ensure that all steps in the transaction process are followed with professionalism and accuracy. Errors that a broker or salesperson could reasonably have been expected to avoid and that damage a client (such as the loss of a sale) may be legally actionable.

What law prohibits discrimination in the sale and rental of a residential property on the basis of race, color, religion, handicap, sex, familial status or national origin? A. Fair Housing Act B. Equal Credit Opportunity Act C. Community Reinvestment Act D. Home Owners Equity Protection Act

A. Fair Housing Act The Fair Housing Act prohibits discrimination against renting and selling property.

Which law ensures that some borrowers have the right of rescission for three business days after a loan contract is signed? A. Regulation Z B. Regulation X C. Title VIII D. Equal Credit Opportunity Act

A. Regulation Z Explanation: The Truth in Lending Act (TILA) of 1968 is a United States federal law and designed to protect Consumers in credit by requiring clear key terms of the lending arrangement and all costs. is legal in Title I of the Consumer Credit Protection Act, as amended. The regulations implementing the statute, which are known as "Regulation Z", are codified at 12 CFR Part 226. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z, as well as the statute itself.

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

A. borrowing too much on the property. The cooperation between the appraiser and the loan originator in "giving what's needed" on the appraisal report leads to the consumer borrowing too much, resulting in an upside-down loan.

The TILA requires full disclosure statements that outline all------terms in simple easy-to-read language A. credit B. debit C. loss D. debt

A. credit The sole purpose of TILA is to promote the informed use of consumer credit, by requiring disclosures about its terms, cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires uniform or standardized disclosure of costs and charges so that consumers can shop. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and certain higher-cost mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer's principal dwelling.

A licensee may not knowingly misrepresent or conceal any information regarding a transaction to which it is a party if that information is A. material. B. asked about directly by a party to the transaction. C. verifiable. D. obtainable in writing.

A. material. licensee may not knowingly misrepresent, circumvent or conceal any material aspect of or information regarding a transaction to which it is a party.

What piece of information is NOT an item reported under the Home Mortgage Disclosure Act (HMDA)? A. property address B. loan amount C. type of loan D. action taken

A. property address HMDA makes available to the public information that helps to show whether financial institutions are serving the housing credit needs of their neighborhoods and communities.

Which is NOT an indicator of predatory lending? A. requiring mortgage insurance B. changing loan terms at the closing C. requiring credit insurance D. raising the interest rate if a payment is late

A. requiring mortgage insurance It's common to require mortgage insurance when the borrower makes less than a 20% down payment. The other examples could signal predatory lending.

If a licensee advertises rates or costs which do not apply to loans of all classes made or negotiated by the licensee A. this fact must be clearly indicated in the ad. B. the licensee may still advertise these rates or costs with no specific restrictions. C. rates or costs for other classes of loans must be included in the ad. D. these rates or costs may not be advertised.

A. this fact must be clearly indicated in the ad. If a licensee advertises rates or costs which do not apply to loans of all classes made or negotiated by the licensee, this fact must be clearly indicated in the ad.

Driving by the property but not actually inspecting its condition is termed a(n) A. windshield appraisal. B. evaluation compliance review. C. review appraisal. D. coerced appraisal.

A. windshield appraisal. A windshield appraisal is driving by the property but not actually inspecting its condition.

Reg Z prohibits

Advertising an attractive interest rate or loan term that is not actually available (TILA-Reg Z)

A mortgage broker serves as...

Agent for the borrower and owes them fiduciary duties.

Which of the following credit terms may be included in an advertisement for real estate without further disclosure? A. "$300 monthly payment" B. "10% annual percentage rate" C. "$5,000 down payment" D. "5 years to repay"

B. "10% annual percentage rate" The APR (annual percentage rate) is the cost of credit that consumers pay, expressed as a simple annual percentage. If the ad only states the APR, then other disclosures are not necessary.

RESPA would apply to which of the following? A. Subdivisions B. 1-4 family residential dwellings C. Homes and residential dwellings only D. Commercial real estate only

B. 1-4 family residential dwellings RESPA (Real Estate Settlement Procedures ACT) applies to (1) to four (4) family residential dwellings. It is primarily there to provide consumers with enough information to enable them to shop for settlement services.

Which of the following statements is true regarding a broker's relationship with a borrower? A. A broker is obligated to reveal material facts which might affect the borrower so long as they do not conflict with his own interests. B. A broker can collect fees for services so long as they are disclosed to the borrower before being provided. C. A broker is obligated to carry out all of a borrower's instructions, regardless of legality. D. A mortgage broker creates an agency relationship with a borrower only if the contract between them explicitly states this.

B. A broker can collect fees for services so long as they are disclosed to the borrower before being provided. A mortgage broker creates an agency relationship with the borrower in all cases and, as a result, must carry out all lawful instructions given by borrowers and disclose to borrowers all material facts of which it has knowledge, which might reasonably affect the borrower's rights, interests, or ability to receive intended benefits from the residential mortgage loan. A mortgage broker can contract for and collect fees for services rendered that are disclosed to the borrower before providing the services.

Junk fees are defined as: A. 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. B. Charges assessed to a borrower by a loan originator that serve little, if any, function and are often hidden in mortgage documents. C. When a lender refuses to make loans secured by property in a certain neighborhood because of the racial or ethnic composition of the neighborhood. C. Fees or other compensation given for services not performed, but as a means of undisclosed commission for business referrals. Kickbacks are prohibited by RESPA.

B. Charges assessed to a borrower by a loan originator that serve little, if any, function and are often hidden in mortgage documents.

In selling a house, certain charges are prohibited by the real estate settlement procedures act. As appropriate, buyer or seller may legally be charged for all of the following except A. Credit reports B. Disclosure settlement statements C. The preparation of loan documents D. Appraisals necessary to make the loan

B. Disclosure settlement statements A Uniform Settlement Statement must given the borrower by the lender at no charge to the borrower.

Which type of fraud generally involves one borrower obtaining one loan for his personal use, under false pretenses? A. Asset fraud B. Fraud for housing C. Fraud for profit D. Fraud to further additional criminal purposes

B. Fraud for housing Fraud for housing generally involves one borrower obtaining one loan (e.g., a homebuyer attempting to buy a home for his personal use, under false pretenses).

Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)? A. Hand written note B. Telephone C. Posted Letter D. e-mail

B. Telephone Enacted in 1974, the Equal Credit Opportunity Act, or ECOA, seeks to ensure that non-credit-related factors, such as a person's race, national origin, or sex, do not enter into a decision to deny a person's request for credit.

What word best describes a group of participants working together to commit single acts of mortgage fraud? A. representation B. collusion C. discernment D. omission

B. collusion Collusion is when a group of participants for example, appraisers, title companies, real estate agents, mortgage brokers or lenders, or even lawyers all work together to commit single acts of fraud.

Ike closes a loan with Max Mortgage. His name is not on the National Do Not Call Registry nor on Max internal do not call list. Max Mortgage can call Ike A. 4 years B. indefinitely C. 5 years D. 2 years

B. indefinitely The National Do Not Call Registry is intended to give U.S. consumers an opportunity to limit the telemarketing calls they receive. Originally, customers were required to re-register their number after 5 years on the registry, but the FCC recently changed this. Today, telemarketers are required to honor all registrations indefinitely, so the registrations will not automatically expire. Customers no longer need to re-register their numbers to continue their preference not to receive telemarketing calls.

If a lender refuses to lend in a specific area because it is inhabited by a protected class (e.g., racial minorities), the lender would be guilty of A. steering. B. redlining. C. fraud. D. blockbusting.

B. redlining. Redlining is when a lender refuses to lend because of where the property is located and not considering the borrower's credit worthiness.

All of the following are elements of predatory lending EXCEPT A. asset-based lending. B. screening. C. equity stripping. D. flipping.

B. screening. Loan flipping (i.e., refinancing in order to earn fees, when it is not in the best interest of the borrower), equity stripping (taking money out of the borrower's equity through financing fees) and asset-based lending (lending without regard to the borrower's ability to pay) are all elements of predatory lending.

If you tell your mortgage loan applicant that his monthly check from public assistance is not an acceptable source of income, you will be in violation of A. The Fair Housing Act B. the ECOA. C. no federal law. D. the Civil Rights Act of 1866.

B. the ECOA. The Equal Credit Opportunity Act (ECOA) is a United States law, enacted in 1974, that makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant's income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The law applies to any person who, in the ordinary course of business, regularly participates in a credit decision, including banks, retailers, bankcard companies, finance companies, and credit unions.

Yield spread premiums are known as...

Borrower credits

Property flipping occurs when...

Bought and sold in short time. HPML Rule works to curb property flipping.

The term "warehousing" as used in real estate financing, means: A. A large bank or savings and loan B. Unregulated real estate loans C. A mortgage company collecting loans prior to resale D. The financing of industrial warehouses

C. A mortgage company collecting loans prior to resale Warehousing is when a Lender collects loans and puts them out as a package for sale. It is the process by which a mortgage banker or mortgage broker assembles mortgages that he or she has made and prepares the mortgages to be sold in the secondary mortgage market. By selling these mortgages the originator now has additional capital that can be used to make more mortgages which in turn may be sold in the secondary mortgage market.

The lender collects and holds taxes in what type of account? A. Trust B. Savings C. Escrow D. Checking

C. Escrow

What federal legislation requires that all printed advertising include the Equal Housing Opportunity logo? A. Equal Credit Opportunity Act B. Fair Credit Reporting Act C. Fair Housing Act D. Truth in Lending Act

C. Fair Housing Act The Fair Housing Act requires that the Equal Housing Opportunity logo be displayed in all printed material and the term "equal housing lender" must be used when broadcast over the airwaves.

Which of the following is true of a dual contract? A. It deprives the seller of receipt of the full price of the property. B. It deprives third parties of their proper fees. C. It defrauds the lender providing the funds for the purchase of the property. D. It is usually used so the real estate agent may earn a higher commission.

C. It defrauds the lender providing the funds for the purchase of the property. Explanation: A dual contract is an instrument that states a sales price higher than the actual sales price in an effort to obtain a larger loan from a lender or lending institution or for the purpose of misinforming a governmental agency or some other reason.

Which of the following is true of property flipping? A. It is illegal. B. It does not apply to a situation where the owner fixes up a property and sells it shortly after acquiring it. C. It involves making a purchase and a quick resale at a profit. D. It is illegal when used to take advantage of a seller who had to sell below market price because he was facing foreclosure.

C. It involves making a purchase and a quick resale at a profit. Explanation: Property flipping occurs when a buyer resells (flips) a property, shortly after he has purchased it, for a much higher price than he paid. Flipping is legal when it is the result of making a wise investment, purchasing a property in need of work and then fixing it up, or being able to take advantage of a seller who had to sell at a below market price, perhaps because he was facing foreclosure.

Mili wanted to buy a house, the seller said that in order to purchase the property Mili must use her brother who is a fully qualified lender, at which time the broker in transaction told the seller that the only way that Mili is buying this house is if she uses their in house lender. At which time Mili voiced her opinion and said, "I am using my lender and that is final" under these circumstances which of the following is true? A. The broker can require his lender because he is the licensed party B. The seller can require her lender because it is her property C. Mili can require her lender because she is the buyer D. Nobody can require any lender because it is a term to be negotiated

C. Mili can require her lender because she is the buyer A buyer is allowed to require a Specific Lender.

A loan originator tells his friend that he can get him a good deal on a loan, and then proceeds to pay his friend's closing costs and points out of his projected income from the transaction. If the employing mortgage broker's fees are not affected by this, which of the following is true? A. The loan originator's action is unethical, as he cannot provide better deals to his friends. B. The loan originator violated no laws, but the friend did, in accepting the better deal. C. Neither the loan originator nor the friend have behaved unethically or illegally. D. The loan originator's action is illegal as it involves a kickback in violation of RESPA Your

C. Neither the loan originator nor the friend have behaved unethically or illegally. There is no violation of RESPA, as RESPA prohibits referral fees and kickbacks among settlement service providers. It does not prohibit actions to lower consumer costs. Since the mortgage broker's fees are not affected, neither the loan originator nor the consumer are behaving unethically toward the broker or each other.

Which federal legislation prohibits kickbacks and referral fees? A. FCRA B. TILA C. RESPA D. ECOA

C. RESPA The Real Estate Settlement Procedures Act (RESPA) specifically prohibits kickbacks, referral fees, and fee splitting.

The late payment charged, or method of computation used for a late payment charge, is required to be disclosed under A. FCRA. B. ECOA. C. TILA. D. HMDA.

C. TILA. A late payment fee is a true cost of credit and, therefore, must be disclosed to the consumer under the Truth in Lending Act.

Ethical practices of a real estate licensee most nearly means: A. Knowledge and respect for the law B. Efficient and effective business practices C. The licensee's honesty and fairness in dealing with the public, clients and associates and customers. D. Being held in the high esteem by the peers and the public

C. The licensee's honesty and fairness in dealing with the public, clients and associates and customers.

When Jones purchased Brown's property on an installment sale, he assumed an existing loan, which exceeded Brown's basis in the property. The amount of the assumed loan over Brown's basis will be: A. Treated as part of the sales price. B. Deducted from Brown's basis. C. Treated as part of the down payment whether cash was received or not. D. Added to Brown's basis.

C. Treated as part of the down payment whether cash was received or not. In an installment sale, the amount of an assumed loan which exceeds the seller's cost basis is treated as part of the down payment and is taxable in the year of the sale.

Mortgage broker Dave knew that his customer worked at a factory that was two weeks away from closing, but in his eagerness to close the deal, he decided to ignore that fact. This might be considered an example of A. negligent misrepresentation. B. good business. C. actual fraud. D. constructive fraud.

C. actual fraud. If Dave made the decision to ignore a critical fact, he could be accused of actual fraud. Constructive fraud is a legal fiction describing a situation where a person or entity gained an unfair advantage over another by deceitful or unfair methods. Intent does not need to be shown as in the case of actual fraud. Some unfair methods may include not telling customers about defects in a product.

The Privacy Rule of the Gramm-Leach-Bliley Act requires that financial institutions provide the consumer with a Consumer Privacy Policy disclosure A. each time the servicing is transferred. B. each time the policy is revised. C. annually as long as the relationship continues. D. at closing only.

C. annually as long as the relationship continues.

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. flipping. B. counseling. C. blockbusting. D. redlining.

C. blockbusting. Blockbusting, also known as panic selling, is prohibited under the federal Fair Housing Act.

William changes his W-2 in an effort to win approval for his loan application to buy a new condo. What is this considered? A. fraud for a friend B. fraud for principle C. fraud for property D. fraud for profit

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

It is unethical for a mortgage broker to provide in loan documentation the A. current occupancy of the property. B. employment history of a client. C. identity of a prior customer to obtain loan for a customer unable to qualify on their own. D. Social Security number of a client.

C. identity of a prior customer to obtain loan for a customer unable to qualify on their own. It is unethical and a common example of loan documentation fraud for a mortgage broker to use identities of prior customers to obtain loan for customers unable to qualify on their own.

According to the Statement on Subprime Lending, predatory lending activities include all of the following EXCEPT A. inducing borrowers to refinance the loan repeatedly so that the lender or originator is paid high points or fees. B. using fraud or deceptive practices to conceal the actual terms of the loan obligation or ancillary products sold with the loan from the borrower. C. offering credit insurance with a mortgage loan. D. making loans based primarily upon foreclosure or liquidation value of a borrower's collateral rather than on the borrower's ability to repay the mortgage.using fraud or deceptive practices to conceal the actual terms of the loan obligation or ancillary

C. offering credit insurance with a mortgage loan. According to the Statement on Subprime Lending, predatory lending is present when at least one of the following conditions is present: loans are based primarily upon foreclosure or liquidation value of a borrower's collateral, rather than on the borrower's ability to repay the mortgage; borrowers are induced to refinance the loan repeatedly so that the lender or originator is paid high points or fees; fraud or deceptive practices are used to conceal the actual terms of the loan obligation or ancillary products sold with the loan from the borrower. The offer of credit insurance is not a predatory lending practice when no deceptive tactics are used in the offer.

At closing, buyer Steve sees that the lender changed the terms of the loan that they had agreed to, but he felt he had no choice but to go ahead with the loan or lose the chance to buy the house. This could be an example of A. affinity marketing. B. negative amortization. C. predatory lending. D. loan flipping.

C. predatory lending. This could be an example of predatory lending.

Ethics A. defines how a person must act. B. is a branch of philosophy dealing with legal behavior. C. provides a guideline for answering questions when a choice of actions is available. D. All of the other options are correct

C. provides a guideline for answering questions when a choice of actions is available. An abstract definition of ethics is that it is a branch of philosophy dealing with moral behavior. Ethics is the general pattern of beliefs as to how a person should act. It provides a guideline for answering questions when a choice of actions is available. When a choice of actions is available, the choice selected can then be based on certain ethical criteria, which establish acceptable means of attaining the objective.

If any triggering terms are used in an ad, which fact is EXEMPT from the disclosure requirement? A. APR B. amount or percentage of down payment C. total closing costs D. terms of repayment

C. total closing costs

HOEPA was expanded to cover...

Closed-end loans, open-end loans, and purchase money mortgages secured by the borrower's principal dwelling.

LO Compensation Rule prohibits...

Compensation based on transaction terms Dual compensation Steering

Which is NOT a triggering term according to TILA, requiring additional disclosing in advertising? A. "Pay only $800 per month" B. "$3,000 down" C. "360 easy payments" D. "Terms to fit your budget"

D. "Terms to fit your budget" Generic statements that do not state specific loan information are exempt from additional disclosing of referencing specific information concerning loan terms.

A contract which, according to the Statute of Frauds, must be in writing in order to maintain a court action for enforcement is: A. The employment of a business opportunity broker to sell the stock, fixtures, and goodwill of a business. B. The employment of a business opportunity broker to find a business to be purchased by his principal. C. The employment of a broker to exchange leases on properties zoned for retail business. D. Any agreement which is not to be performed within one year.

D. Any agreement which is not to be performed within one year. Statute of Frauds is a state law which requires certain contracts to be in writing in order to be enforceable at law, among them, a real property lease for more than one year or an agent's authorization to sell real estate.

A lender provides a borrower with an initial amortization schedule for Private Mortgage Insurance (PMI) disclosure at loan closing for an adjustable-rate mortgage. The lender MUST also provide a written notice stating the A. Lender's right to increase the monthly payment amount for PMI B. Borrower's right to refuse a PMI C. Lender's right to extend the time for monthly payments for a PMI D. Borrower's right to cancel PMI

D. Borrower's right to cancel PMI

Under the USA Patriot Act, which of the following is NOT obtained by a mortgage broker from a borrower for customer identification purposes? A. Alien identification number B. Passport number C. Taxpayer identification number D. Credit card number

D. Credit card number

A mortgage loan broker assistant should not permit an unlicensed assistant to do which of the following: A. All of the other options should not be permitted. B. Make an appointment C. Research the rates D. Explain the significance of a document to the parties

D. Explain the significance of a document to the parties A mortgage loan broker assistant should not permit an unlicensed assistant to explain the significance of a document (e.g. an inspection report)

If a deed has a restrictive covenant which prohibits the sale of the property to persons of a particular race, that covenant will: A. Invalidate the conveyance B. Provide the grantor the power to enforce the covenant C. Provide the grantee the power to void the conveyance D. Have no effect on the conveyance, but the covenant will be unenforceable

D. Have no effect on the conveyance, but the covenant will be unenforceable Racial deed restrictions are unenforceable even though the majority of the homeowners might want them, because they violate the U.S. Constitution. They have no effect on the conveyance.

A mortgage broker is considered incompetent if: A. He accepts an application fee from an applicant. B. He accepts a commitment fee from a prospective borrower. C. He discloses in writing prior to accepting a commitment fee that rate of interest may change at closing. D. He does not disclose in writing prior to accepting application fee the exact amount of the fee

D. He does not disclose in writing prior to accepting application fee the exact amount of the fee

What kind of mortgage would give Cathy deferred interest payments for the first two years, anticipating that her salary would increase? A. Full amortization B. Non amortization C. Partial amortization D. Negative amortization

D. Negative amortization Negative amortization is A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan's principal.

According to the Truth In Lending Act (TILA), which of the following notices by the creditor informs the customers about their rights to cancel a loan? A. Servicing disclosure statement B. Affiliated business arrangement disclosure C. Good Faith Estimate (GFE) D. Notice of right to rescind

D. Notice of right to rescind In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership is or will be subject to the security interest has the right to rescind the transaction. Lenders are required to deliver two copies of the notice of the right to rescind and one copy of the disclosure statement to each consumer entitled to rescind. The notice must be on a separate document that identifies the rescission period on the transaction and must clearly and conspicuously disclose the retention or acquisition of a security interest in the consumer's principal dwelling; the consumer's right to rescind the transaction; and how the consumer may exercise the right to rescind with a form for that purpose, designating the address of the lender's place of business

A mortgage broker realizes that his customer will not qualify for the loan, so he convinces her to apply using her mother's identity and financial data. Even though the mother does not know that her information was used, she could be considered a A. co-mortgagor. B. mock purchaser. C. secret signer. D. Straw buyer

D. Straw buyer A straw purchase is any purchase whereby the purchaser is knowingly acquiring an item or service for someone who is, for whatever reason, unable to purchase the item or service themselves.

What is redlining? A. When a lending institution does not place a branch office in a neighborhood for reasons other than economic impact B. When a lending institution refuses a loan solely on sound economic grounds C. The practice of lining out portions of mortgage documents so that the document becomes invalid D. The practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the economic qualifications of the applicants

D. The practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the economic qualifications of the applicants Redlining is the practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the economic qualifications of the applicants

The federal Fair Housing Act is also known as A. the State Civil Rights Law. B. the Civil Rights Act of 1866. C. the ECOA. D. Title VIII.

D. Title VIII. The federal Fair Housing Act of 1968 is also known as Title VIII of the Civil Rights Act.

Under RESPA, who would be subject to fines and penalties if a kickback is paid? A. the person who initiated the kickback arrangement B. the person who initiated the kickback arrangement C. the person who received the kickback D. all parties paying or receiving a kickback

D. all parties paying or receiving a kickback

Laws and regulations A. do not overlap with ethics. B. define the maximum type and level of conduct to which practitioners are held. C. are generally subject to dispute. D. define the minimum type and level of conduct practitioners may use without penalty from society.

D. define the minimum type and level of conduct practitioners may use without penalty from society.

What type of scam entails homeowners who are encouraged to refinance their property over and over until little or no equity remains? A. property skimming B. double sold loan C. reverse equity D. loan flipping

D. loan flipping Home loan flipping is a trick used by the lenders to make you pay extra cash (points and closing costs) by forcing you into refinancing more often than you need. For example, everyone of us would like to get some extra cash, especially if we have had our mortgage for some years and we are convinced that our equity has to work for us. Our lender can easily talk us into loan refinancing telling us we should tap the equity we have built over the years and make a cash-out refinance. The repetitive unnecessary loan refinancing is in fact the so-called home loan flipping.

What type of loans is involved in the air loan scheme? A. conventional B. FHA C. VA D. non-existent

D. non-existent An air-loan scheme involves non-existent loans and no collateral loans; for example, as in a mortgage-fraud scheme in which a mortgage loan originator invents a property and a borrower in order to earn profits on completed loan transactions by defrauding lenders.

At closing, the buyer realizes that the terms of the loan were different from those he agreed to. Since his furniture was already on the moving truck, the buyer felt he had to go through with the loan. This could be an example of A. affinity marketing. B. loan flipping. C. negative amortization. D. predatory lending.

D. predatory lending.

Which is LEAST LIKELY to be an example of illegal flipping? A. an inflated appraisal B. a series of sales and quick resales C. a group of sellers and buyers changing ownership of one property among them D. purchasing and remodeling a house and selling it for quick profit

D. purchasing and remodeling a house and selling it for quick profit Explanation: Purchasing and remodeling a house and then selling it for a quick profit is the good side of flipping, which is perfectly legal. The illegal side of flipping is when colluding parties profit from the sale of property with an 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.

A lender who refuses to make loans on property in certain neighborhoods is demonstrating the discriminatory practice of A. blockbusting. B. servicing. C. steering. D. redlining.

D. redlining. Refusing to make loans on property in certain neighborhoods for discriminatory reasons is called redlining.

Which is LEAST LIKLEY to be an indicator of predatory lending? A. charging excessive prepayment penalties B. increasing interest charges on late loan payments C. falsifying loan documents D. requiring mortgage insurance

D. requiring mortgage insurance Requiring mortgage insurance does not indicate predatory lending.

Three conditions that an affiliated business must meet to satisfy referral requirements...

Disclosure of relationship No required use of the referred entity Limitations on the "things of value" resulting from the arrangement

Income qualifications should always use...

Factual data. Stated income (liar's loans) led to an increase in loan applicant fraud.

The most common type of fraud involving borrowers are...

Falsified applications.

Service release premiums are...

Fees lender can earn when selling loans in secondary market. Often cited in the controversy over yield spread premiums earned by loan originators.

Gramm-Leach-Bliley Act requires...

Financial institutions to provide customers with a privacy notice as well as an opt out notice. Aimed at protecting nonpublic personal information.

Ginnie Mae...

Government owned - not stockholder owned Primary Function - guarantees securities backed by FHA, VA, RHS loans. does not buy loans. Does not guarantee or deal with conventional mtgs.

HOEPA prepayment penalty provisions...

If a loan features a prepayment penalty in force for more than 36 months or exceeding 2% of the amount prepaid, the loan is subject to the HOEPA and the penalty is prohibited.

A straw seller...

Is an individual who accepts a fee to falsely claim ownership to a property.

Reverse redlining is...

Practice of targeting neighborhoods that were previously redlined as credit risks in order to trick residents into a dangerous and predatory loans.

The Safeguards Rule and Disposal Rule are...

Preserving the confidentiality of financial information. FTCs Disposal Rule and the Gramm-Leach-Bliley Safeguards Rule

Goals of the Fair Housing Act include...

Providing fair housing. Prohibit discrimination in the sale and renting of housing Prohibiting discrimination in mtg lending transactions

When ordering an appraisal, it is illegal to...

Request value.

Overvaluation of real estate violates

TILA. Fair Housing Act, Financial Institution Reform, Recovery and Enforcement Act also include regulations relating to property valuation

A sign of fraud on a sales contract is ...

The purchase price being higher than the list price.

Mark-ups are the practice of...

Unilaterally increasing the charges of another settlement service provider and retaining the difference. HUD covers mark-ups a form of illegal fee-splitting and a violation of RESPA.

An advertisement saying "Refinance today and wipe debt clean!"...

Violates the Federal Reserve's Staff Commentary on Reg Z revisions.

Fiduciary duty means

acting in the best interest of another - loyalty, good faith and an obligation to consider the other party first

Borrower credit is...

an amount paid by the lender to a third party originator for locking a borrower's interest rate at a higher rate than par. The intent is to help subsidize closing costs for a borrower in exchange for taking a higher rate.

MAP Rule prohibits...

any material misrepresentation, expressed or implied, in any commercial communication, regarding any term of a mortgage credit product.

Equity stripping is..

basing loans only on equity - does not consider repayment ability.

With regard to fraud, loan originators are required to...

be on the lookout for and report anything that could jeopardize a lender's investment. Originators have a fiduciary obligation to the lenders.

Equity based lending occurs when..

decision based on equity along (see Equity stripping)

An air loan is

fraudulent - Fictitious borrower obtains mtg on fictitious property.

Legal and ethical ways of providing disclosures include

in person, via us mail, or fax. Email and secure document handling are also becoming acceptable means. (Verbal and public posting NOT)

Adverse action occurs

when a creditor makes an unfavorable decisions. ECOA requires 30 days