A borrower signs an occupancy affidavit for a $340,000 purchase, then tells the originator in an email that she will rent it out from day 1. What must the originator conclude about proceeding with the loan as an owner-occupied transaction?
Correct Answer
D) The occupancy representation conflicts with the stated plan; do not close as owner-occupied without resolving it
D. Resolve the conflicting occupancy information before closing on those terms. The email contradicts the owner-occupancy representation. Disclose the conflict for investigation and appropriate underwriting. Scope and exceptions: A corrected, eligible transaction is not ruled out. Do not infer criminal guilt solely from this exercise. Source: Fraud for Profit: occupancy misrepresentation — https://archives.fbi.gov/archives/news/stories/2005/december/operation-quick-flip-1
Why This Is the Correct Answer
D. Resolve the conflicting occupancy information before closing on those terms. The email contradicts the owner-occupancy representation. Disclose the conflict for investigation and appropriate underwriting. Scope and exceptions: A corrected, eligible transaction is not ruled out. Do not infer criminal guilt solely from this exercise.
Why the Other Options Are Wrong
Option A: A servicing matter, to be raised with the lender after the closing
Waiting leaves the conflict unresolved.
Option B: Acceptable, as long as she moves in within the first 12 months
Invents a blanket 12-month cure.
Option C: Acceptable, since occupancy is checked only at the 60-day mark
Invents a universal verification checkpoint.
Exam Tip
Resolve contradictory facts before funding.
More Ethics & Fraud Questions
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