Which scenario most clearly indicates a straw buyer arrangement?
Correct Answer
B) A borrower who cannot answer basic questions about the property during the application process
A straw buyer is someone who purchases property on behalf of another person who cannot qualify for the loan. A key red flag is when the supposed borrower lacks basic knowledge about the property they are purchasing, indicating they are not the true buyer. This violates federal fraud prevention requirements.
Why This Is the Correct Answer
A straw buyer is someone who purchases property on behalf of another person who cannot qualify for the loan. A key red flag is when the supposed borrower lacks basic knowledge about the property they are purchasing, indicating they are not the true buyer. This violates federal fraud prevention requirements.
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 mortgage loan originator discovers that a borrower submitted falsified bank statements during the loan application process. What is the MLO's primary obligation under federal regulations?
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