An MLO presents a loan estimate showing a base loan amount of $180,000, but the final loan documents show $195,000 with the difference attributed to 'closing cost financing' that includes $8,000 in credit insurance products the borrower doesn't recall discussing. The borrower signed the initial application but not specific product authorizations. This scenario primarily involves:
Correct Answer
C) Credit packing with inadequate disclosure
This represents credit packing where credit-related products are added to the loan without proper disclosure or specific authorization. The significant increase in loan amount due to financed credit insurance products that weren't properly discussed constitutes predatory packing practices.
Why This Is the Correct Answer
This represents credit packing where credit-related products are added to the loan without proper disclosure or specific authorization. The significant increase in loan amount due to financed credit insurance products that weren't properly discussed 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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A property appraisal includes comparable sales that are all located more than 5 miles away from the subject property, despite several recent sales within 1 mile. The appraiser notes 'no suitable comparables in immediate area.' This suggests:
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A lender's policy requires all self-employed borrowers to provide 3 years of tax returns instead of the standard 2 years. Data shows this affects 35% of Hispanic borrowers compared to 12% of white borrowers, as Hispanic borrowers are more likely to be self-employed in the lender's market area. The lender can document higher default rates among self-employed borrowers with only 2 years of documentation. This scenario represents: