Mortgage Ethics and Fraud Prevention 2

Question 1

A borrower asks their loan officer to list a higher purchase price on the sales contract so they can receive extra cash at closing. This is an example of:

Accepted Answer

Sales price inflation fraud

Answer

Equity stripping

Answer

Property flipping

Answer

Straw buyer scheme

Question 2

Under RESPA, a mortgage broker who receives an unearned fee for referring a borrower to a title company is guilty of:

Accepted Answer

A kickback violation

Answer

An affiliated business arrangement violation

Answer

A yield spread premium abuse

Answer

A TILA disclosure error

Question 3

Which federal law requires mortgage originators to report suspicious activity that may indicate money laundering?

Accepted Answer

Bank Secrecy Act

Answer

TILA

Answer

RESPA

Answer

ECOA

Question 4

A borrower who has poor credit uses a relative with excellent credit to apply for the mortgage, intending for the relative to have no ownership stake. This is called a:

Accepted Answer

Straw buyer scheme

Answer

Co-borrower arrangement

Answer

Silent second scheme

Answer

Nominee loan

Question 5

An appraiser who consistently provides inflated valuations in exchange for continued business from a lender is violating:

Accepted Answer

USPAP and ethical standards

Answer

Only state licensing laws

Answer

TILA only

Answer

RESPA affiliated business rules only

Question 6

Which practice involves convincing elderly homeowners to repeatedly refinance their mortgages to generate fees while depleting their home equity?

Accepted Answer

Equity stripping through serial refinancing

Answer

Redlining

Answer

Silent second fraud

Answer

Double selling

Question 7

A loan officer who processes a loan application knowing the stated income is fabricated is:

Accepted Answer

Potentially criminally liable for mortgage fraud

Answer

Only liable if the loan defaults

Answer

Protected if the borrower signed the application

Answer

Only required to report the borrower to authorities