Loan Officer Ethics and Professional Conduct Questions and Answers

Question 1

A loan originator is working with a first-time homebuyer who has a limited understanding of mortgage products.
The originator rushes through the explanation of a complex adjustable-rate mortgage, focusing only on the low initial 'teaser' rate and failing to adequately explain the risks of future payment shock.
This action MOST likely constitutes which type of UDAAP violation?

Accepted Answer

An abusive practice

Answer

An unfair practice

Answer

A deceptive practice

Answer

A discriminatory practice

Question 2

A loan officer tells a prospective applicant that their company's policy is to avoid making loans for properties valued under $100,000. While this policy is applied to all applicants equally, it disproportionately affects applicants in a nearby minority-majority neighborhood where property values are generally lower. What lending discrimination concept does this scenario illustrate?

Accepted Answer

Disparate Impact

Answer

Redlining

Answer

Overt Discrimination

Answer

Disparate Treatment

Question 3

Under the Mortgage Acts and Practices (MAP) Rule, also known as Regulation N, which of the following advertising statements is a clear violation?

Accepted Answer

“We are an official FHA-endorsed lender operating under the authority of the U.S. Government.”

Answer

“Interest rates are at historic lows! Call us today for a personalized quote.”

Answer

“Apply now and you may be able to skip your next mortgage payment.”

Answer

“This 5/1 ARM features a low introductory rate for the first 60 months.”

Question 4

A loan officer leaves a borrower's file, which contains their credit report and bank statements, unsecured on their desk in an open-plan office. A colleague from another department is able to view the sensitive information. This careless handling of non-public personal information is a violation of the requirements set forth by the:

Accepted Answer

Gramm-Leach-Bliley Act (GLBA)

Answer

Real Estate Settlement Procedures Act (RESPA)

Answer

Fair Housing Act (FHA)

Answer

Home Mortgage Disclosure Act (HMDA)

Question 5

A loan officer is concerned that a property's appraisal may come in too low to make the deal work. The officer calls the appraiser and says, “We really need this property to be valued at $350,000 for the loan to be approved. Future business depends on it.” This is a prohibited act known as:

Accepted Answer

Appraisal coercion

Answer

Steering

Answer

Blockbusting

Answer

A straw buyer arrangement

Question 6

A borrower mentions to their loan officer that they plan to take out a large car loan immediately after their mortgage application is submitted but before closing. The loan officer advises the borrower to wait until after the mortgage has funded and recorded to avoid jeopardizing the approval. Ethically and professionally, what is the loan officer's conduct?

Accepted Answer

Counseling the borrower to commit fraud by concealing a material debt.

Answer

Providing prudent financial advice to protect the borrower's eligibility.

Answer

A violation of the Equal Credit Opportunity Act (ECOA).

Answer

A permissible strategy to manage the borrower's debt-to-income ratio.