A loan originator includes credit life insurance, debt protection insurance, and extended warranty coverage in a borrower's loan without clearly explaining these products or obtaining proper consent. The borrower discovers these charges only at closing. This practice is known as:
Correct Answer
B) Loan packing
Loan packing refers to the practice of including unnecessary insurance products, warranties, or other add-ons in a loan without the borrower's knowledge or proper consent. These products increase the loan amount and generate additional income for the lender while providing little or no benefit to the borrower. The TILA-RESPA Integrated Disclosure (TRID) rule requires clear disclosure of such products.
Why This Is the Correct Answer
Loan packing refers to the practice of including unnecessary insurance products, warranties, or other add-ons in a loan without the borrower's knowledge or proper consent. These products increase the loan amount and generate additional income for the lender while providing little or no benefit to the borrower. The TILA-RESPA Integrated Disclosure (TRID) rule requires clear disclosure of such products.
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:
People Also Study
Federal Mortgage-Related Laws
23% of exam
General Mortgage Knowledge
23% of exam
Mortgage Loan Origination Activities
25% of exam
Uniform State Test Content
12% of exam
Previous Question
Under the Dodd-Frank Act's Ability-to-Repay rule, which practice would most likely be considered evidence of predatory lending?
Next Question
A loan originator tells a borrower that their loan application has been approved when it has not yet been submitted to underwriting. This would most likely constitute which type of UDAAP violation?