Mortgage Mortgage Ethics and Fraud Prevention Questions and Answers 2

Question 1

A loan officer inflates a borrower's income on the application to help them qualify for a larger loan. What type of fraud is this?

Accepted Answer

Income fraud

Answer

Falsifying income documentation on a mortgage application constitutes income fraud, a common form of mortgage fraud.

Question 2

Which federal law requires mortgage professionals to report suspected fraud?

Accepted Answer

Bank Secrecy Act (BSA)

Answer

The Bank Secrecy Act requires financial institutions to file Suspicious Activity Reports (SARs) when mortgage fraud is suspected.

Question 3

An appraiser knowingly overvalues a property at the request of a real estate agent to facilitate a sale. Which ethical violation has occurred?

Accepted Answer

Appraisal independence violation

Answer

Appraisal independence is violated when an appraiser is pressured or agrees to produce a biased valuation to benefit another party.

Question 4

What is a 'straw buyer' in the context of mortgage fraud?

Accepted Answer

A buyer who purchases property on behalf of someone who cannot qualify for a mortgage

Answer

A straw buyer is someone who purchases property on behalf of another person who cannot qualify, hiding the true buyer's identity from the lender.

Question 5

Which practice involves a mortgage originator steering a qualified borrower into a higher-cost loan to earn a larger commission?

Accepted Answer

Predatory lending

Answer

Predatory lending includes steering qualified borrowers into more expensive loan products for the originator's financial benefit.

Mortgage Practice Test