Ethics, Fraud & Consumer Protection

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:

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's family member works as an appraiser and occasionally appraises properties for the MLO's borrowers through the normal appraisal management company rotation. The MLO never requests this appraiser specifically. Is this arrangement problematic?

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:

During a fair lending examination, regulators discover that a bank's loan officers receive higher commissions for loans with interest rates above 6%, and statistical analysis shows borrowers in predominantly minority neighborhoods receive these higher-rate loans more frequently. This compensation structure would MOST likely be viewed as:

An MLO discovers a borrower has refinanced with three different lenders in the past two years, each time increasing the loan balance and paying substantial fees. The borrower mentions they were told each refinance would 'improve their financial situation.' The MLO's appropriate response should be:

An appraisal comes back significantly higher than the contract price with no reasonable explanation. The loan officer should:

An MLO's advertisement includes the statement 'Payments as low as $500 per month.' What additional disclosures are required under TILA?

Which of the following business relationships must be disclosed to borrowers under RESPA?

Which federal agency is primarily responsible for receiving Suspicious Activity Reports (SARs) related to mortgage fraud?

A lender's website features a mortgage calculator that consistently understates monthly payments by excluding certain fees that are always required. When borrowers apply, they receive accurate Loan Estimates with all fees properly disclosed. The lender argues the calculator is just a 'preliminary tool.' This practice is most likely:

A borrower claims rental income from a property but cannot provide a copy of the deed or property tax records showing ownership. When asked about this, they state the property is in a trust. What should the MLO request?

A mortgage company's website features a testimonial from a customer stating 'I saved $500 per month!' without any context about the customer's specific situation. This practice is:

An MLO's spouse works as a real estate agent and refers clients to the MLO. The MLO offers better rates to these referrals without disclosing the relationship. This practice is:

A borrower's ex-spouse calls claiming they are still on the mortgage and demands to know the current payment status. The MLO verifies the ex-spouse was previously on the loan but was removed during a recent refinance. How should the MLO respond?

An investor purchases a property using a straw buyer, then immediately sells it to another straw buyer at an inflated price, with plans to rent it back to the original seller. The original seller will live in the property. This scheme primarily constitutes:

A borrower's adult child with power of attorney requests loan modification documents. The power of attorney document is six months old but appears valid. What should the MLO verify before releasing information?

A borrower's adult child calls asking about their parent's mortgage application because the parent is in the hospital. What should the MLO do?

An applicant claims self-employment income of $8,000 monthly but their business checking account shows consistent deposits of exactly $8,000 on the same day each month for the past six months. What does this pattern most likely indicate?

An MLO calls a consumer at 8:45 PM Eastern Time from California (5:45 PM Pacific). The consumer is located in New York. Is this call timing compliant with TSR regulations?

A real estate agent, appraiser, and loan officer work together to inflate property values and create fake employment documents to help borrowers qualify for larger loans than they can afford. The conspirators split the excess loan proceeds. This scenario describes:

A borrower creates a fake LLC and generates false rental income documentation to qualify for a loan on a property they intend to live in but cannot otherwise afford. This scheme represents:

When an MLO's compensation is higher for certain loan products, they must:

An MLO discovers that a borrower has overstated their income on the loan application after the loan has been approved but before closing. The MLO's ethical obligation is to:

A borrower asks an MLO to help them inflate their assets on a bank statement to qualify for a loan. The MLO should:

Which action by an MLO would constitute a breach of fiduciary duty to their borrower?

Which scenario represents a conflict of interest that an MLO must disclose?

An MLO is working with a borrower who speaks limited English. To fulfill their ethical obligations, the MLO should:

An MLO learns that a competing lender is offering the same borrower better terms than what the MLO's company can provide. The MLO's ethical obligation is to:

A mortgage loan originator receives a referral fee from a real estate agent for directing clients to that agent. This arrangement is:

An MLO discovers that their employing lender is systematically steering minority borrowers toward subprime products despite their qualification for prime rates. What is the MLO's primary ethical obligation?

An MLO learns that a competing lender is offering significantly better terms to the same borrower. The MLO's lender cannot match these terms. What is the MLO's ethical obligation?

An MLO discovers that a borrower's income documentation contains a forged signature after the loan has already closed. The borrower is current on payments and the loan is performing well. What is the MLO's primary ethical obligation?

A borrower provides an MLO with a gift card worth $200 as appreciation for excellent service during the loan process. What should the MLO do?

An MLO realizes they made an error in calculating a borrower's qualifying income, resulting in approval for a loan amount higher than what the borrower can actually afford. The error is discovered after closing. What should the MLO do?

An MLO's spouse works as a loan processor at a competing mortgage company. What potential conflict issue should the MLO be most concerned about?

An MLO's company has a policy requiring use of a specific credit reporting agency that provides volume discounts. A borrower asks to use a different credit agency. How should the MLO respond?

An MLO owns a 15% stake in a title company. When originating loans, what must the MLO do regarding this ownership interest?

Which scenario represents the MOST serious conflict of interest for an MLO?

An MLO discovers that his brother-in-law is applying for a mortgage loan at his company. What is the most appropriate action the MLO should take?

A borrower offers to pay an MLO an additional $1,000 'bonus' for helping secure a loan approval. What should the MLO do?

An MLO regularly refers borrowers to a specific appraiser who consistently provides favorable valuations. The appraiser has never offered any compensation to the MLO. Is this arrangement problematic?

An MLO discovers that a borrower's income documentation appears to be falsified after the loan has been submitted to underwriting but before closing. The MLO's manager instructs them to proceed with the loan because 'the investor will catch it if there's really a problem.' What should the MLO do?

An MLO learns that their company's underwriter is consistently approving loans with questionable documentation for borrowers referred by a specific real estate agent who brings significant business to the company. What ethical obligation does the MLO have?

An MLO's company has a business relationship with a title company where they receive a small ownership stake in exchange for referring business. The MLO always discloses this relationship on the Loan Estimate. Is this arrangement compliant?

An MLO is approached by a borrower who wants to purchase a home from the MLO's business partner in a separate real estate investment company. The MLO has no direct financial interest in the specific property. What should the MLO do?