A loan originator notices that a borrower's employment verification letter has a phone number that, when called, goes directly to the borrower's personal cell phone voicemail. The borrower explains that their small company doesn't have a receptionist. What should the MLO do?
Correct Answer
A) Request additional employment documentation such as tax returns or pay stubs
While the explanation may be legitimate, the MLO should request additional documentation to verify employment when standard verification methods raise questions. This follows due diligence requirements under federal regulations to properly verify borrower information.
Why This Is the Correct Answer
While the explanation may be legitimate, the MLO should request additional documentation to verify employment when standard verification methods raise questions. This follows due diligence requirements under federal regulations to properly verify borrower information.
More Ethics & Fraud Questions
A fair lending examination reveals that a lender's minimum credit score requirement of 680 disproportionately excludes minority applicants compared to non-minority applicants. To defend this practice, the lender must demonstrate that the requirement is:
An appraiser uses comparable sales from 18 months ago in a rapidly declining market instead of recent sales. The resulting appraisal is 25% higher than current market value. This suggests:
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:
A borrower admits to an MLO that they inflated their income on the initial application but wants to provide correct information now. What should the MLO do?
An MLO discovers that their company's loan processing system automatically generates higher rate quotes for borrowers in certain ZIP codes, even when those borrowers have identical credit profiles to borrowers in other areas. The MLO is concerned about fair lending implications but is told by management that the system uses 'proprietary risk algorithms.' What is the MLO's best course of action under UDAAP principles?
A lender offers a mortgage product with a temporary introductory rate that is prominently advertised, but the subsequent rate increase is disclosed only in fine print at the bottom of marketing materials. The lender argues this practice is acceptable because all required disclosures are technically present. Under UDAAP standards, this practice is most likely:
A borrower submits a rental agreement showing $2,500 monthly income from a property they claim to own. Which of the following would be the MOST significant red flag indicating potential rental income fraud?
A borrower inflates their income on a loan application for a vacation home they plan to rent out occasionally but also use personally. The primary motivation is investment return. This scenario constitutes:
An appraisal report shows the appraiser inspected the property on a date when public records indicate the property was under construction and uninhabitable. The appraisal describes a completed property. This suggests:
A borrower with excellent payment history on their current 6% mortgage approaches an MLO about refinancing to a 5.5% rate. The MLO discovers the borrower has significant equity but recommends a cash-out refinance with a 7% rate and $8,000 in fees, claiming rates have increased since the initial quote. This scenario most likely represents:
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Federal Mortgage-Related Laws
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A borrower asks an MLO to expedite processing by skipping certain verification steps that are typically required but not legally mandated. The borrower claims financial hardship and urgency. How should the MLO respond?