Ethics, Fraud & Consumer Protection

In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?

An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?

An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?

A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?

A branch pays its originators 1.1% of the loan amount on every file, and an extra $400 whenever the loan closes with an escrow waiver. Escrow waivers at this branch are granted only on loans priced above par, and the originator decides whether to offer one. Under Regulation Z, which part of this compensation arrangement, if any, is prohibited?

A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?

A borrower pays a mortgage broker $3,400 directly at closing. The lender also offers the same brokerage 1.5% of the loan amount as a lender-paid credit on the same file. Under Regulation Z's dual-compensation rule, may the brokerage accept both payments on this transaction?

Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?

A residential mortgage lender files a suspicious activity report about a borrower on 8 April. On 15 April the borrower calls to ask why the file has stalled, and the branch manager wants to tell him a report was filed so he can explain himself. May the manager tell the borrower that a suspicious activity report was filed?

The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?

A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?

For each loan type the consumer requests, an originator reviews options from a significant number of regular creditors and reasonably believes the consumer qualifies for the options shown. Which presentation meets the required option categories for the anti-steering safe harbor?

An appraisal comes in at $412,000 against a contract price of $440,000. A processor emails the appraiser: "We send you 6 files a month. Have another look at the value before we decide who gets the next one." Does the processor's message violate Regulation Z's valuation-independence rule?

A lender with $900 million in assets wants its own staff appraiser to value files it originates. The appraiser would report to the sales manager and receive a bonus on each loan that closes. Does this reporting and compensation arrangement satisfy the valuation-independence safeguards for a creditor of this size?

A title company pays a real estate brokerage $75 for every closing the brokerage sends its way. The brokerage does no work on the title file beyond passing the client's name and number. Does this referral payment comply with RESPA Section 8?

A lender rents desk space in a real estate office for $2,400 a month. Comparable space in the building lets for about $600 a month, and the office refers roughly 12 loans a month to the lender. If the above-market portion is paid in exchange for those referrals, does the rent arrangement comply with RESPA Section 8?

In return for a steady flow of referrals, a lender gives an agent 4 tickets to a game worth $900, pays $1,500 toward the agent's advertising and provides free use of a conference room. Which of these benefits constitutes a thing of value under RESPA Section 8?

A file shows a $9,400 deposit 6 days before application, a verification of employment faxed from the borrower's home number, and 2 pay stubs whose year-to-date figures do not reconcile with each other. Which of these facts warrants further verification before the file is approved?

A practice costs 1 in 400 borrowers about $18 each, and it lets the lender price every loan roughly 0.05 points cheaper across the book. If reliable evidence establishes that the consumer or competitive benefits outweigh the injury, which conclusion follows under the statutory unfairness test?

Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?

A borrower-facing employee is unsure what to do when marketing proposes a rate the company is not prepared to offer. What is the correct response?

A compliance review finds that a title company offers a gift card for each borrower referral. What should the MLO do next?

A borrower-facing employee is unsure what to do when a loan officer wants different terms because of a protected applicant characteristic. What is the correct response?

A settlement service provider proposes billing a $200 fee to be shared three ways among parties who each "touch" the file briefly. Compliance is asked what test the arrangement has to meet.

During intake, an MLO refers a borrower to an affiliated title agency. What is the best compliant response?

A borrower-facing employee is unsure what to do when an MLO refers a borrower to an affiliated title agency. What is the correct response?

An underwriter reduces the qualifying income of a 63-year-old applicant because "he will retire in 2 years", despite an employer letter confirming the position continues. Does reducing income solely on this age-based retirement assumption comply with ECOA?

A caller with an accent asks about a loan on a 3-unit building. The originator says: "Those are hard to get approved. You would probably be better off renting for now." If the originator discourages the caller because of perceived national origin rather than a neutral credit criterion, does Regulation B prohibit the statement before an application is submitted?

A lender declines an application from a couple expecting a child in 4 months, citing the coming reduction in the household's working hours. If the lender has no documented income reduction and acts solely on the pregnancy, which federal fair-lending protections are implicated?

A broker tells owners on a block that 5 families of a particular background have moved in and values will fall. If the broker makes these claims to induce listings for profit and the background is a protected characteristic, what discriminatory practice is illustrated?

During intake, marketing proposes a rate the company is not prepared to offer. What is the best compliant response?

An MLO is reviewing procedures for a case where a loan officer wants different terms because of a protected applicant characteristic. What is the proper handling?

In a pricing desk question, a disclosure specialist sees facts tied to Fair Lending Laws. What should the file reflect?

Before the team acts on a production meeting, a closing coordinator must address Fraud Reporting Requirements. Which response is most defensible?

A borrower qualifies for both a 6.25% loan paying the originator 1 point and a 6.75% loan paying 2 points. The originator presents only the second, describing it as the one most likely to be approved. Does directing the borrower to the higher-paying loan for the originator's compensation violate the anti-steering rule?

A borrower is $340 a month short on the ratio. The originator suggests she ask her employer to describe her occasional weekend shifts as a guaranteed 8 hours a week on the verification. Would describing nonguaranteed shifts as guaranteed income constitute a material misrepresentation?

An investor with 4 properties cannot qualify for a 5th. His cousin, who has never seen the house, signs the application, takes title and immediately deeds the property back to the investor after closing. Assuming the cousin's nominee role and planned transfer were concealed from the lender, what mortgage-fraud scheme does this arrangement illustrate?

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?

A branch pays each originator the same 1.1% on every file, then at year end pays a bonus from the profit on the 240 loans the branch closed. How should the fixed-percentage pay and mortgage-profit bonus be evaluated under Regulation Z's compensation rule?

A caller asks about a loan on a $180,000 house in a neighborhood the originator privately considers declining. He says: "We are not really doing much over there at the moment." If the geographic discouragement is based on the neighborhood's racial composition rather than a legitimate neutral credit criterion, what fair-lending concern does it raise?

An originator realizes on the morning of closing that he never disclosed his 30% ownership of the title agency the buyer was sent to 6 weeks ago. What should the originator do about the omitted affiliated-business disclosure now?

Two products fit the borrower. Product A pays the branch 1.9% and product B pays 1.1%. A costs the borrower $2,300 more over the time she plans to stay. How should the originator present the options without steering the borrower based on the branch's higher compensation?

Three days before closing a borrower mentions she financed $18,000 of furniture last week. The file was approved at a 41% total debt ratio. What should the originator do with the newly disclosed furniture debt before closing?

A 78-year-old owns her home free of debt and is offered a $140,000 cash-out refinance on which $31,000 goes in fees and the payment is 62% of her income. If underwriting confirms the borrower cannot sustain the payment, what predatory-lending pattern do the excessive fees and unaffordable equity-based loan illustrate?

An originator posts on social media: "Rates from 5.99% — DM me." The post carries no NMLSR ID, no APR and no terms. Does omitting the APR from this mortgage rate advertisement comply with Regulation Z?

A lender pays a brokerage $4,000 a month under a marketing services agreement. The brokerage sends 22 referrals that month and performs no measurable marketing. Does paying for an MSA with no actual marketing services comply with RESPA Section 8?

A $264,000 application lists an address the credit report has never shown in 7 years, and the report carries a fraud alert asking that identity be verified by phone. What identity-verification step should the originator take in response to the fraud alert?

A closing package adds a $4,900 single-premium credit life policy the borrower did not ask for, financed into the $210,000 loan. What predatory-lending practice does adding this unsolicited financed insurance product illustrate?

An originator emails a complete loan file, including 2 years of tax returns and the borrower's social security number, to a personal address to work at home. If the personal mailbox is outside the institution's authorized safeguards, is sending the sensitive file there permitted?

A company offers to negotiate a modification for a borrower 4 payments behind and asks for $1,500 up front before contacting the servicer. Assuming the company is subject to the MARS advance-fee rule and no exemption applies, may it collect this upfront payment?