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MLO > Ethics > Flashcards

Ethics Flashcards

1
Q

Where must the Borrowers info be kept safely?

A

Under the Gramm-Leach-Bliley and The Safeguard Rules.

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2
Q

Under what, do people have the right to apply for a mortgage?

A

Under Fair Lending, Fair housing, and ECOA.

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3
Q

When assessing the borrowers income what must you consider?

A

You must consider Public assistance but only if the assistance meets program requirements for income.

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4
Q

What do you not have the right to do?

A

You do not have the right to change documentation to assist the borrower in meeting program guidelines. (You can’t change info just so someone can apply for a mortgage) (This could lead to Mortgage Fraud)

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5
Q

What is Redlining?

A

When refusing to take an application due to the location of the property. (Not allowing applicants from a specific area of the market)

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6
Q

What is Reverse Redlining?

A

The practice of targeting particular areas for predatory lending, for higher prices or lending on unfair terms (Resulting those tricked into a mortgage they can’t afford, being charged more for the interest rate and fees obtaining the mortgage)

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7
Q

Whats a conflict of interest?

A

When an appraiser is connected to anyone on the loan, and the appraiser must be replaced.

(you can’t talk/contact the appraiser to influence value, threaten payment, or cut them off from new business)

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8
Q

If any loan files are fraudulent, who do you report it to?

A

To my compliance officer.

(If you don’t, you can be penalized or fired if you fraudulently alter any docs for the borrower)

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9
Q

Do you inform the underwriter of changes to the loan file?

A

Yes. It is a responsibility.

(You don’t want the company to have to repurchase a loan because of info that you with held. (Didn’t tell the underwriter about)

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10
Q

Do the bank statements and income of the borrower have to match up with your verification?

A

Yes. All income, assets and any info used to qualify the borrower must be verified on all agency programs.

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11
Q

What do you show if you offer a borrower a Non-Traditional Loan?

A

You show them other loan products that may be available to them.

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12
Q

An affiliated business disclosure is required if an MLO is licensed as a real estate agent and loan officer, or their family owns as little as 1% of a 3rd party company in a settlement process.

A

Yes.

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13
Q

What’s a referral?

A

Anything of value being given or received from a:
-3rd party
-Real estate agent
-Builder

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14
Q

Kick backs are not allowed in any transaction.

A

True.

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15
Q

How to check for Asset Fraud?

A

The sellers name on the contract must match the name of the owners listed on the Title Report.

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16
Q

How to check for Sales Contract Red Flags:

A

Exs of red flags on an application:

No credit history or “thin” credit files.

Invalid Social Security number or variance from that on other documents.

Duplicate Social Security number or additional user of Social Security number.

Recently issued Social Security number.

Liabilities shown on credit report that are not on mortgage application

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17
Q

How to check for Occupancy Fraud:

A

FHA requires the borrower to owner-occupy the property for 60 days. (A piece of real estate in which the person who holds the title also uses the home as their primary residence as they rent out separate space to tenants.)

Required by:
-Fannie
-Freddie
-USDA
-VA

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18
Q

How to check for Income Fraud:

A

Income verifications must match the documentation provided by the borrower. (The 4506 T must be used to verify borrowers tax returns)

-4506T: A form to request tax return info (Must file after tax year beginning in one calendar year and ending in the following year, also known as fiscal tax year)

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19
Q

If the borrowers verifications show overtime and bonuses, it must state the likelihood of continuing in the future. (Probability of continuing to do overtime and get bonuses)

A

True

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20
Q

What is Power of Attorney?

A

A document used to appoint one person to make decisions on behalf of another person. (Before doing this, it must be approved by your underwriter)

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21
Q

What is Wire Fraud?

A

It’s an increasing form of fraud when financial fraud uses telecommunications or info technology.
(When borrowers are receiving requests for funds to be wired to someone that is not connected to the transaction, so you must inform your borrower not to wire funds without asking me (the loan officer)or the title company if the request is real)(Meaning someone is trying to take over your finds)

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22
Q

How to check for Application Fraud:

A

The information on the credit report and application must match. (Names, SS#, residency and work history)And if these don’t match then it may be fraudulent.

23
Q

How to check for Employment Fraud:

A

The bank statements, income deposits must match the verification of income.

24
Q

How to check for Liability Fraud:

A

Must ensure that the borrower has disclosed(Covered, keep secret) all debts, alimony, or child support payments if a fraudulent activity is suspected.

25
Q

What must be told on the LE (Loan Estimate)?

A

All costs and terms. The LE and CD (Closing disclosure) must be delivered according to the required time frames under TRID (Another name for TILA) (Truth In Lending Act)

26
Q

Your borrower has a joint-asset account with another person. Most of the money in the account belongs to the non-borrower. The lender requires two months of bank statements. Under this circumstance, the documentation needed by the lender requires you to:

A

disclose and document deposits for the borrower and non-borrower.

27
Q

What rule made it illegal to charge upfront fees and requires disclosures in ads for mortgage assistance relief providers?

A

The MARS Rule.

(MARS Rule: Prohibits mortgage assistance to providers from making false or misleading claims about their services, like that the homeowner will get the promised results)

28
Q

An investor is pitching the sale of properties as opportunities to new real estate investors, promising improbably high returns and loan risks, this could be considered:

A

Chunking.

(Chunking: Is the sale of properties at artificially inflated prices pitched as investment opportunities to naive real estate investors or was promised high returns with little to no risk)

29
Q

You have been working with a client for the past six months who has finally been approved by the lender and is ready to close. Two days before closing, interest rates drop and you explain to your customer that you are unable to go with a different lender at the better rate because of the standing commitment to the current lender. You also inform your client that breaking a rate with a lender is very damaging to the broker-lender relationship. After explaining the situation, your client still chooses to back out of the loan and go with a different loan officer. Your client’s action in this situation is:

A

Legal but Unethical.

30
Q

You pull credit on a husband and wife. It turns out their debt-to-income ratio is too high. You notice the majority of the debts belong to the husband. You also note that the wife has enough income to qualify on her own. You remove the husband from the loan, with permission from the borrower, submit the file, and receive approval. This action is:

A

Legal and Ethical (Except for communal property sales)

(Communal Property Sales: When each party will own an undivided one-half interest in the property, like a married individual asset.)

31
Q

A borrower wants to purchase a second home and tells you that they intend to rent the property out when they are not living in it. You have reviewed their financial information and realize that the borrower would qualify for financing if the property is classified as a second residence. However, if the property is classified as an investment property, the borrower is unlikely to qualify. What should you do?

A

Classify the property as a rental property even though the borrower intends to reside there part of the year.

(Reside: To live permanently and continuously , dwell.)

32
Q

A lender has a minimum loan amount that they will lend on, that minimum loan amount is $150,000. The average home value to a minority in the neighborhood is $100,000, so the lender does not help anyone in that minority lender, this would be:

A

Disparate Impact.

(Occurs when policies, practices, or rules that appear. to be neutral result in a disproportionate impact on a protected group)

EX: A common and simple example of “disparate impact” discrimination is when an employer has a policy that it will only hire individuals who are a certain minimum height or who can lift a certain minimum weight.

33
Q

Your customer calls you in the morning and tells you to lock the interest rate at the 5.5% you initially disclosed. You commit to lock the rate, but your day becomes busy and you aren’t able to lock it until later in the day. When you go to lock the rate, you notice that the pricing has changed since this morning and the rate of 5.5% is now going to cost an additional $500.00. What is the most appropriate course of action?

A

Pay $500 cost and lock the rate. (This was your fault so you have to pay.)

34
Q

On a Federal Residential Loan Application: You initially disclose a rate of 5% to the customer but are floating the rate. Over the next few days, rates improve and you have the option to lock the customer in at a rate of 4.75% and earn the same compensation. This behavior would be considered:

A

Legal and Ethical.

35
Q

A history showing the title changes regarding a property is required by an underwriter for what purpose?

A

To verify the absence of property flipping.

36
Q

An MLO leaves a borrower’s file open on his/her desk for just a moment. An Identity thief sees the borrower’s credit report which contains a huge amount of information. Fortunately the MLO quickly returns. What potential Federal laws is the MLO violating?

A

FACTA and GLBA.

-FACTA (Fair and Accurate Credit Transaction Act): Designed to prevent identity theft.

-GLBA (Gramm-Leach-Bliley Act): Enacted to control the ways financial institutions deal with the private info of individuals. (Privacy and Security)

-FACTA has a ruler called the disposal rule
That dictates how you and your company dictate the info
(Protect the info)

37
Q

3 ARMS to GLBA:

A
  1. The Safeguard rule
    2.The Opt-out rule
    3.The Pre-texting rule
38
Q

What is the Safeguard Rule?

A

It identifies and assesses risks to customer info.(A program made to protect customer info)

39
Q

What is the Opt-out rule?

A

It gives a party an agreement discretion over certain practices that require firms to seek permission before acting. (30 days given for the customer to opt-out)

40
Q

What is the Pre-texting rule?

A

Designed to counter identity theft. (To detect unauthorized access to personal, non public info.)

EX: Impersonating as a student to request private info by phone, email, or other media

41
Q

3 types of privacy notices:

A
  1. Initial Notice
  2. Annual Notice
  3. Revised Notice
42
Q

You are working on a file referred to you by a realtor. The realtor calls you to see if there is going to be any problem getting the customer qualified. The realtor wants to know what the borrower’s credit scores are before presenting the offer. The most appropriate course of action is:

A

Refer the realtor to the borrower.

43
Q

Considering the legislation of the Secure and Fair Enforcement Act (S.A.F.E. Act) of 2008, originating a loan for a family member or other blood relation is considered:

A

Legal and Ethical.

44
Q

You are working with a customer who has disclosed they have new payment obligations that do not appear on their credit report. You realize that your customer qualifies for a loan based on figures calculated using only payment obligations reported on their credit. In order to ensure your client qualifies, you decide to exclude the payment obligations that do not appear on the credit report. This action is:

A

Illegal and Unethical.

45
Q

You have completed the necessary Pre-licensure education, testing, and application requirements to obtain your mortgage license. You have been hired by a brokerage and expect your background check to clear shortly. You have a friend who is eager to proceed with a loan application and your manager at the brokerage has said that you can start the file under his/her name, then switch it back to your name once your license arrives. This action is:

A

Illegal and Unethical.

46
Q

A transaction where the buyers have signed a contract to purchase real property, but have the intention of immediately selling it to another buyer can be a sign of:

A

Illegal Property Flipping.

47
Q

A potential client is shopping around for a competitive rate and a 15-day lead time to close. The brokerage you work for offers highly competitive rates, has an average lead to close time of 30 days, and a fast lead to close time of 21 days. Understanding these figures, you tell the client you can meet their demands and secure their business. This action is:

A

Legal and Unethical.

48
Q

You interview a customer and collect all the information needed to fill out the 1003 and run credit. Before running credit, you specifically ask the client if it is okay to run their credit, and they consent. You should now:

A

Have the customer sign a borrowers authorization form and then pull the credit.

49
Q

A borrower is looking to purchase a new home, this new home is smaller than their current home and less expensive. They tell the MLO that they intend to sell their current home once they’ve gotten a new home. The borrower closes on their new home and promptly defaults on their old home, this is called:

A

Buy and Bail.

(Buy and Bail: Buying a new home before walking away from a home you already own that is underwater)

50
Q

If fraud is discovered by the servicer, what is LEAST likely to occur?

A

The borrower will experience a rate increase.

51
Q

A potential borrower calls you for rates and programs. Assume that they are on the DNC Registry. You are allowed to call them back for what period of time?

A

3 months.

DNC (Do not call list)
You can call after 3 months

52
Q

A credit card company has a written policy that anyone between the age of 21-27 can only have a credit limit of $1,000 and anyone over 30 automatically gets a credit limit of $5,000. This is an example of:

A

Overt Discrimination.

(Overt Discrimination: Occurs when a consumer is openly and/or actively discriminated against on a prohibited reason.)

53
Q

You have a customer who has been approved by the lender and is ready to close. The customer backs out at the last minute because of a recent interest rate drop and opts to go with a different loan officer. You paid for the appraisal and want to invoice the customer and be reimbursed. This course of action would be considered:

A

Legal and Ethical.

54
Q

When is a loan officer authorized to refuse to accept a loan application?

A

When the info supplied by the applicant appears fraudulent.

MLO (15 decks)

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