CMB Ethics and Professional Standards in Mortgage Banking 2

Question 1

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?

Accepted Answer

30 calendar days

Answer

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.

Question 2

Which practice involves a mortgage professional misrepresenting a borrower's income, assets, or employment to obtain loan approval, constituting mortgage fraud?

Accepted Answer

Application fraud or misrepresentation

Answer

Application fraud involves intentional misrepresentation of material facts on a loan application, which is a federal crime and a severe breach of professional ethics.

Question 3

The Gramm-Leach-Bliley Act (GLBA) requires mortgage lenders to provide borrowers with privacy notices primarily to:

Accepted Answer

Disclose how the lender shares and protects nonpublic personal information

Answer

GLBA mandates that financial institutions, including mortgage lenders, inform customers about their privacy policies and how nonpublic personal information is collected, used, and shared.

Question 4

A mortgage loan originator who knowingly submits a fraudulent appraisal to obtain a higher loan amount is subject to which of the following consequences?

Accepted Answer

Civil liability, loss of license, and potential criminal prosecution

Answer

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.

Question 5

Under the Dodd-Frank Act's anti-steering provisions, a mortgage loan originator's compensation may NOT be based on:

Accepted Answer

The terms of the transaction, such as the interest rate

Answer

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.

CMB - Certified Mortgage Banker Practice Test

CMB - Certified Mortgage Banker Practice Test

CMB Ethics and Professional Standards in Mortgage Banking 2