A borrower with a 4.5% mortgage rate and $40,000 in equity is contacted monthly by the same lender offering to 'unlock your home's value.' After the fourth contact, the borrower refinances to a 6.25% rate, extracting $30,000 cash but paying $6,500 in fees. Six months later, the lender contacts them again about another refinance. The lender's primary violation involves:
Correct Answer
B) Targeting for systematic loan flipping
This demonstrates systematic targeting for loan flipping, where the lender repeatedly solicits the same borrower for refinancing that primarily benefits the lender through fees rather than providing meaningful borrower benefit. The pattern of contact and subsequent refinancing attempts shows predatory intent.
Why This Is the Correct Answer
This demonstrates systematic targeting for loan flipping, where the lender repeatedly solicits the same borrower for refinancing that primarily benefits the lender through fees rather than providing meaningful borrower benefit. The pattern of contact and subsequent refinancing attempts shows predatory intent.
More Ethics & Fraud Questions
A lender's mobile app prominently displays a 'pre-qualification' feature that asks for minimal information but generates loan amount estimates that are consistently 20-30% higher than what borrowers actually qualify for when they complete full applications. The app includes a disclaimer that estimates are 'subject to full underwriting.' This practice is most likely:
An MLO discovers that multiple loan applications from different borrowers contain identical handwriting in the signature sections, despite different purported signers. The applications were submitted by different real estate agents. What is the most appropriate immediate action?
A mortgage loan originator receives a lead from a real estate agent about a potential borrower. Before calling this consumer, the MLO must:
An MLO tells Asian applicants that they need larger down payments 'because that's what investors prefer for your type of loan,' while telling similarly qualified white applicants that standard down payments are acceptable. This practice represents:
A mortgage company advertises 'Guaranteed approval for all credit types!' but internally has minimum credit score requirements of 580. This advertisement is problematic because it:
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Under the Dodd-Frank Act's Ability-to-Repay rule, which practice would most likely be considered evidence of predatory lending?