Mortgage Mortgage Ethics and Professional Conduct Questions and Answers 3

Question 1

A mortgage broker learns confidential financial information about a client during the loan process. Under professional ethics standards, this information may be shared:

Accepted Answer

Only as required by law or with the client's written consent

Answer

With any interested third party if it helps close the loan

Answer

With other loan officers in the same brokerage freely

Answer

With the listing agent to facilitate the transaction

Question 2

Which scenario best illustrates a conflict of interest in mortgage lending?

Accepted Answer

An appraiser inflates a property value at the request of the loan officer who hired them

Answer

A loan officer recommends a fixed-rate mortgage to a risk-averse borrower

Answer

A processor verifies employment information with the borrower's employer

Answer

A closer explains settlement charges to the borrower at signing

Question 3

Under the SAFE Act, what is required of all mortgage loan originators?

Accepted Answer

Registration through the Nationwide Multistate Licensing System (NMLS)

Answer

Membership in the National Association of Realtors

Answer

A minimum of five years of industry experience

Answer

A degree in finance or accounting

Question 4

A mortgage company's marketing materials guarantee the lowest rate in the market without any conditions. This practice is:

Accepted Answer

A violation of truth-in-advertising and TILA requirements

Answer

Acceptable if the company has competitive rates

Answer

Permitted under the First Amendment

Answer

Legal as long as no specific rate is quoted

Question 5

What is the primary purpose of the three-day right of rescission under TILA for refinance transactions?

Accepted Answer

To give the borrower time to reconsider and cancel the transaction without penalty

Answer

To allow the lender to verify the borrower's employment

Answer

To provide time for the title company to complete the title search

Answer

To allow the appraiser to finalize the property valuation

Question 6

A loan officer notices that a real estate agent is pressuring a buyer to waive the appraisal contingency on a property that appears overpriced. Ethically, the loan officer should:

Accepted Answer

Advise the borrower independently about the risks of waiving the appraisal contingency

Answer

Stay silent because appraisal contingencies are between buyer and seller

Answer

Agree with the agent to ensure the deal closes

Answer

Inflate the loan amount to cover any potential appraisal shortfall