Mortgage Ethics and Professional Conduct Questions and Answers

Question 1

A mortgage loan originator (MLO) is working from home and leaves a borrower's loan file, which contains their Social Security number and bank account details, on their kitchen table.
A visiting guest is able to see the documents.
This MLO's action is a potential violation of which federal regulation?

Accepted Answer

The Gramm-Leach-Bliley Act (GLBA)

Answer

The Real Estate Settlement Procedures Act (RESPA)

Answer

The Fair Housing Act

Answer

The Home Mortgage Disclosure Act (HMDA)

Question 2

A mortgage loan originator recommends a specific title insurance company to a borrower. The MLO fails to disclose that they receive a significant monthly fee from this title company for every loan that closes with them, which is not a bona fide payment for services rendered. This arrangement is a violation of:

Accepted Answer

RESPA Section 8

Answer

The Equal Credit Opportunity Act (ECOA)

Answer

The Homeowners Protection Act (HPA)

Answer

The Fair Credit Reporting Act (FCRA)

Question 3

A mortgage loan originator receives a call from a potential borrower who wants to purchase a home in a predominantly minority neighborhood. The MLO, believing the property values in that area are likely to decline, tells the borrower, "You have a great income; you could qualify for a much better home in the new suburban development. Let's focus our search there instead." This practice is an example of:

Accepted Answer

Steering

Answer

Redlining

Answer

Blockbusting

Answer

Reverse Redlining

Question 4

Which of the following actions by a mortgage company would most likely be considered an "abusive" act or practice under the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) regulation?

Accepted Answer

Taking unreasonable advantage of a borrower's lack of understanding of the material risks and costs of a loan.

Answer

Charging a standard late fee after the grace period expires.

Answer

Sending monthly statements that clearly outline principal and interest payments.

Answer

Requiring a borrower to have homeowners insurance.

Question 5

According to the SAFE Act, which of the following individuals would be required to obtain a state mortgage loan originator license?

Accepted Answer

An employee of a home builder who, for compensation, offers and negotiates the terms of a loan for a buyer of one of the builder's homes.

Answer

An individual who negotiates mortgage terms for an immediate family member.

Answer

A registered loan originator working for a federally insured depository institution.

Answer

An attorney who negotiates loan terms on behalf of a client as an ancillary part of their legal services.

Question 6

An MLO notices a borrower's stated income on their application seems unusually high for their stated profession and is supported by bank statements with several large, irregular cash deposits. The MLO suspects the income is inflated but decides to submit the loan anyway, hoping the underwriter won't notice. What ethical principle is the MLO most directly violating?

Accepted Answer

Duty of Care

Answer

Confidentiality

Answer

Advertising Standards

Answer

Appraiser Independence

A mortgage loan originator (MLO) is working from home and leaves a borrower's loan file, which contains their Social Security number and bank account details, on their kitchen table.A visiting guest is able to see the documents.This MLO's action is a potential violation of which federal regulation?