Mortgage Mortgage Ethics and Fraud Prevention Questions and Answers 3

Question 1

What is an 'air loan' in mortgage fraud?

Accepted Answer

A loan for a property that does not exist or a borrower who does not exist

Answer

A loan with a zero percent interest rate

Answer

A loan that exceeds the property's appraised value

Answer

A loan funded entirely by private investors

Question 2

A closing agent diverts escrow funds for personal use before the transaction settles. What is this scheme called?

Accepted Answer

Escrow fraud or embezzlement

Answer

Equity stripping

Answer

Double closing fraud

Answer

Silent second fraud

Question 3

Which red flag most strongly indicates potential occupancy fraud on a mortgage application?

Accepted Answer

The borrower already owns multiple investment properties but claims the new purchase as a primary residence

Answer

The borrower has a high credit score

Answer

The borrower makes a 20% down payment

Answer

The borrower uses a conventional loan product

Question 4

What ethical obligation does a mortgage broker have when presenting loan options to a borrower?

Accepted Answer

To present options that are in the borrower's best interest, not just the most profitable for the broker

Answer

To only present the loan with the lowest interest rate available

Answer

To recommend the loan with the longest repayment term

Answer

To always recommend government-backed loans first

Question 5

What is 'chunking' in the context of mortgage fraud?

Accepted Answer

Using multiple investors to fund portions of a fraudulent deal without their knowledge of each other

Answer

Breaking a large loan into smaller pieces to avoid reporting thresholds

Answer

Selling mortgage-backed securities in small lots

Answer

Dividing closing costs among multiple parties

Question 6

A seller secretly provides the buyer's down payment through an inflated purchase price, concealing this from the lender. What type of fraud is this?

Accepted Answer

Down payment fraud involving a silent kickback

Answer

Foreclosure rescue fraud

Answer

Builder bailout fraud

Answer

Reverse mortgage fraud