When an MLO's compensation is higher for certain loan products, they must:
Correct Answer
B) Disclose the compensation arrangement and still recommend suitable products
MLOs must disclose compensation arrangements that could create conflicts of interest while still fulfilling their duty to recommend suitable products based on the borrower's needs, not the MLO's compensation.
Why This Is the Correct Answer
MLOs must disclose compensation arrangements that could create conflicts of interest while still fulfilling their duty to recommend suitable products based on the borrower's needs, not the MLO's compensation.
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 loan officer notices that the borrower's employment verification shows a start date that is after the application date. This is a red flag for:
Next Question
An employment verification form is returned showing the borrower earns $6,500 monthly, but the company's website lists this position's salary range as $35,000-$45,000 annually. The HR contact's phone number traces to a virtual phone service. What is the most significant red flag?