Mortgage Ethics and Fraud Prevention 4

Question 1

A borrower who claims a rental property as their primary residence to obtain a lower interest rate is committing:

Accepted Answer

Occupancy fraud

Answer

Misrepresenting a non-owner-occupied investment property as a primary residence to obtain better loan terms is occupancy fraud.

Question 2

In a 'builder bailout' scheme, a real estate developer secretly provides down payment funds to buyers while falsely certifying the buyer provided funds themselves. This inflates the:

Accepted Answer

Loan-to-value ratio beyond what is disclosed to the lender

Answer

Builder bailout schemes hide the true source of down payment funds, causing the lender to underestimate the real LTV ratio and assume more risk than disclosed.

Question 3

A mortgage professional who discovers a colleague is submitting fraudulent loan files should first:

Accepted Answer

Report the activity through proper channels such as compliance or a SAR filing

Answer

Mortgage professionals have a legal and ethical duty to report known fraud through proper channels, including internal compliance and Suspicious Activity Reports.

Question 4

Which type of fraud involves a criminal assuming a homeowner's identity to illegally transfer property title and then obtain a mortgage?

Accepted Answer

Identity theft / deed fraud

Answer

Identity theft combined with deed fraud occurs when a criminal uses a stolen identity to forge a deed transfer and subsequently extract equity through fraudulent loans.

Question 5

The Home Mortgage Disclosure Act (HMDA) helps detect potential discriminatory lending practices primarily by requiring lenders to:

Accepted Answer

Collect and report demographic data on loan applicants

Answer

HMDA requires lenders to collect and report applicant demographic data, enabling regulators to identify patterns of potential lending discrimination.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Ethics and Fraud Prevention 4