A mortgage application includes credit disability insurance costing $150 monthly, financed into the loan. The borrower has group disability coverage through their employer providing 70% income replacement. The MLO justified the additional coverage by stating 'you can never have too much protection' without analyzing the borrower's existing coverage. This represents:
Correct Answer
C) Credit packing without needs analysis
This demonstrates credit packing where insurance products are sold without proper needs analysis or consideration of existing coverage. Adding expensive credit insurance without evaluating the borrower's actual insurance needs or existing protection constitutes predatory packing practices.
Why This Is the Correct Answer
This demonstrates credit packing where insurance products are sold without proper needs analysis or consideration of existing coverage. Adding expensive credit insurance without evaluating the borrower's actual insurance needs or existing protection constitutes predatory packing practices.
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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Previous Question
A lender's fair lending review discovers that their loan officers consistently require additional income verification from borrowers with foreign-sounding names, even when these borrowers are U.S. citizens with established credit histories. This practice would constitute:
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An MLO discovers that a borrower's bank statements show large, round-number deposits ($5,000, $10,000) occurring monthly for the past three months, but the borrower's pay stubs show much smaller amounts. The borrower claims these are gifts from family. What red flag does this represent?