Ethics and Professional Standards in Mortgage Banking Flashcards
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Read the first 7 Ethics and Professional Standards in Mortgage Banking flashcards as text
Under the Equal Credit Opportunity Act (ECOA), a lender must provide an adverse action notice to a declined applicant within how many days of the credit decision?
Answer: 30 calendar days
ECOA requires lenders to notify applicants of adverse credit decisions within 30 days, specifying the reasons for denial so applicants can understand and potentially remedy the situation.
Which practice involves a mortgage professional misrepresenting a borrower's income, assets, or employment to obtain loan approval, constituting mortgage fraud?
Answer: Application fraud or misrepresentation
Application fraud involves intentional misrepresentation of material facts on a loan application, which is a federal crime and a severe breach of professional ethics.
The Gramm-Leach-Bliley Act (GLBA) requires mortgage lenders to provide borrowers with privacy notices primarily to:
Answer: Disclose how the lender shares and protects nonpublic personal information
GLBA mandates that financial institutions, including mortgage lenders, inform customers about their privacy policies and how nonpublic personal information is collected, used, and shared.
A mortgage loan originator who knowingly submits a fraudulent appraisal to obtain a higher loan amount is subject to which of the following consequences?
Answer: Civil liability, loss of license, and potential criminal prosecution
Appraisal fraud constitutes federal mortgage fraud, exposing the MLO to civil liability, revocation of the NMLS license, and criminal prosecution under 18 U.S.C. § 1014.
Under the Dodd-Frank Act's anti-steering provisions, a mortgage loan originator's compensation may NOT be based on:
Answer: The terms of the transaction, such as the interest rate
Dodd-Frank prohibits MLO compensation from being tied to loan terms (rate, APR, prepayment penalties) to prevent steering borrowers to products that maximize originator pay rather than serving borrower interests.
Which of the following is NOT a required disclosure under the Integrated Mortgage Disclosure (TRID) rule?
Answer: The borrower's internal credit risk grade used by the lender
TRID requires disclosure of loan terms, costs, and APR to borrowers, but the lender's internal credit risk classification is a proprietary underwriting metric that is not required to be disclosed.
The Community Reinvestment Act (CRA) holds depository institutions accountable for:
Answer: Meeting the credit needs of all communities they serve, including low- and moderate-income areas
CRA requires federally regulated depository institutions to serve the credit needs of the communities where they operate, including LMI neighborhoods, to combat redlining.