Ethics NMLS

What is a UDAAP?

Unfair, Deceptive, or Abusive Act or Practices

What is an air loan?

A loan obtained on a property (land) where a structure does not exist yet has been presented as having a property on the lot.

What is blockbusting?

A process by which real estate agents convince white property owners to sell their houses at low prices because of fear that persons of color will soon move into the neighborhood.

What is the purpose of the MARs (Mortgage Assistance Relief Service) rule?

It ensures that borrowers are protected from foreclosure rescue schemes by precenting mortgage relief providers from collecting any money from a borrower unless the customer agrees to mortgage relief and services have been provided.

What is redlining?

The pattern of discrimination against people trying to buy homes, usually in minority and racially changing neighborhoods.

How does an unethical MLO charge excessive fees?

1) Padding closing fees, by increasing costs above their actual cost. 2) Inflated appraisal costs, ex. charging for an appraisal ($1000) when only a "drive by" appraisal ($300) was done. 3) Padding recording fees, charging what is higher than the set recording fees under law. 4) Unbundling, which is duplicating fees already covered under another charge.

What are red flags?

Alerts from credit reporting companies, suspicious companies, personal information that is inconsistent, and/or suspicious account activity.

What does GLBA stand for?

Gramm-Leach-Bliley Act

What is a "substansial injury" in regards to unfair acts and practices?

It commonly occurs in the form of monetary harm, like costs incurred hy the borrower due to the act or practice.

What is the Safeguard Rule?

It is a branch of the GLBA that requires companies to establish a written security plan that describes its program to protect information

What is disparate treatment?

It is either overt discrimination, or there is comparative evidence of discrimination.

What is chunking?

It is the the sale of properties at inflated prices, pitched as investment opportunities to naive investors; often their information is stolen and used by the third party to open loans in the investor's name, leaving them with multiple loans that they cannot repay.

What is a non-arm's length short sale transaction?

It is when a borrower sells to someone they have a direct relationship or business affiliation with, in order to sell the home to their associate/family member, while the borrower remains living there.

What is short sale fraud?

It is when, instead of short sales being legal, a perpetrator profits by allowing the loan to default.

What is the main purpose of the Gramm-Leach-Bliley Act?

Its main purpose is to restrict the disclosure of NPI (Non-Public Personal Information)

In what cases are property flips illegal?

Regular property flipping is perfectly legal, it is becomes illegal when the property is purchased and quickly resold at an artifically inflated price, utilizing artificially inflated appraisals.

What is a short sale flip transaction?

The perpetrator of a short sale flip convinces a short sale lender to approve a short payoff, while hiding a pre-arranged sale for a significantly higher price.

What is a foreclosure rescue scheme?

These are schemes that take advantage of borrowers in/about to go into foreclosure, where a "specialist" is paid for services they do not provide and the borrower ultimately loses their home.

What are straw buyers?

They are loan applicants that take out the mortgage in their name, but have no intent of occupying the property, as it for someone else.

What are the 3 rules of the Gramm-Leach-Bliley Act?

They are the Safeguard Rule, the Opt-Out Rule, and the Pretexting Rule.

What is the Opt-Out Rule?

This is a branch of the GLBA that provides NPI privacy policy disclosures to consumers, with the option for them to opt out.

What is builder bailout?

This is a situation where (usually in condo conversions) a builder with multiple unsold units will use fradulent appraisals or inflated loan amounts to increase the sales price and sell the remaining properties.

What is price gouging?

This is when a creditor takes advantage of a borrower by charging high prices, either fradulently or because the consumer has no available alternative.

What is a buy and bail?

This is when a homeowner is current on their mortgage, but they are underwater (the value of home has fallen below the amount owed), so they apply for a new home mortgage, and allow the first home to go into foreclosure.

What is predatory lending?

This is when a lender coerces a borrower into taking a mortgage that has a high interest rate or fees, strips their equity, or places them in a less-than loan that benefits the lender.

What is equity stripping?

This is when a lender encourages a borrower to get a loan they do not apply for, in order to foreclose on the home once the borrower fails to make payments, and strips the equity the borrower has built up.

What is credit insurance packing?

This is when a lender sneaks in paperwork at closing that induces credit insurance (or other "benefits") that the borrower did not request, in order to charge more than was agreed to, without including it in the disclosed amount.

What is equity skimming?

This is when a rescue artist or investor buys a property in foreclosure and agrees to lease the house to the homeowner, but pays off the foreclosure amount to acquire the deed, receiving the remaining amount of the homeowner's equity.

What is churning?

This is when an MLO excessively redoes the loan in order to generate fees and commissions, even though there is no benefit in redoing the loan for the borrower.

What is steering?

This is when an MLO steers a borrower into a subprime product when they could qualify for a better loan, because the MLO will benefit from this decision.

What is affinity fraud?

This is when perpetrators exploit a common bond in order to exploit trust between people of a common group.

What is reverse mortgage fraud?

This is when somebody manipulates a senior citizen into obtaining a reverse mortgage, but pockets the senior victim's proceeds.

What are loan modification schemes?

This kind of fraud is when a company claims that they can assist homeowners in keeping their property, but they charge upfront fees and fail to execute promises, putting the homeowner at greater risk of losing their home.

What is the Pretexting Rule?

This prohibits pretexting, which is obtaining customer information under false pretenses, including impersonating someone to use their personal information.

What is the most ideal loan for all borrowers?

Trick question! There is no ideal loan for every borrower collectively, this is why you have the responsibility as an MLO to provide borrowers with the best options and help them decide which works best for them.