Advisor Ethics and Communication Flashcards

Under the Fair Housing Act, a mortgage advisor may NOT lawfully consider which factor when evaluating a loan applicant?

Answer: National origin

The Fair Housing Act prohibits discrimination in mortgage lending based on national origin, among other protected classes.

A client requests that their advisor keep certain financial details confidential from co-borrowers on the same loan. The advisor should:

Answer: Inform the client that all co-borrowers are entitled to the same material loan disclosures

All co-borrowers have equal legal rights to material loan information, and selective disclosure violates fair lending requirements.

Which behavior by a mortgage advisor would most likely violate the duty of loyalty to a client?

Answer: Steering a client to a higher-rate product because it yields a larger yield spread premium

Steering clients to less favorable products for personal financial gain violates the duty of loyalty and anti-steering regulations.

What is the primary purpose of the NMLS (Nationwide Multistate Licensing System) in relation to mortgage advisor ethics?

Answer: To provide a centralized registry ensuring advisors meet background, education, and conduct standards

NMLS maintains licensing records, background checks, and disciplinary history to uphold conduct standards across the mortgage industry.

An advisor overhears a colleague making discriminatory comments about loan applicants from a specific ethnic group. Ethical conduct requires the advisor to:

Answer: Report the behavior to a supervisor or compliance officer

Ethical advisors have an obligation to report fair lending violations or discriminatory practices through proper compliance channels.

A borrower asks their mortgage advisor to omit a recently opened credit card from the loan application. The advisor should:

Answer: Refuse and explain that all open credit accounts must be disclosed on the application

Material omissions on loan applications constitute mortgage fraud; all open credit accounts must be disclosed.

When a client asks for an advisor's personal opinion on whether home prices will rise or fall, the ethical response is to:

Answer: Clarify that market timing is uncertain and provide factual current market data instead

Advisors must distinguish between factual data and speculation, avoiding predictions that could unduly influence major client decisions.