An MLO encounters an application where the borrower's adult child is listed as a co-borrower but will not live in the property, and the income ratios only work with both incomes included. The child admits they are only helping their parent qualify. This represents:
Correct Answer
C) Potential fraud for housing requiring careful documentation of the arrangement
This scenario requires careful analysis and proper documentation. While the parent's housing need suggests fraud for housing, the arrangement must be properly structured and disclosed to avoid fraud. The child's non-occupancy and sole purpose of income qualification could constitute fraud if not properly documented as a legitimate co-borrower arrangement. Proper disclosure and compliance with lender guidelines for non-occupying co-borrowers is essential.
Why This Is the Correct Answer
This scenario requires careful analysis and proper documentation. While the parent's housing need suggests fraud for housing, the arrangement must be properly structured and disclosed to avoid fraud. The child's non-occupancy and sole purpose of income qualification could constitute fraud if not properly documented as a legitimate co-borrower arrangement. Proper disclosure and compliance with lender guidelines for non-occupying co-borrowers is essential.
More Ethics & Fraud Questions
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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?
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A lender requires all applicants to provide tax returns for the past two years, but consistently waives this requirement for white applicants while strictly enforcing it for minority applicants. This is an example of:
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A mortgage loan originator receives a referral fee from a real estate agent for directing clients to that agent. This arrangement is: