Mortgage Ethics and Professional Conduct 2

Question 1

A mortgage loan originator (MLO) discovers mid-process that a borrower's income was overstated on the application. What is the MLO's ethical obligation?

Accepted Answer

Correct the application and notify the lender of the discrepancy

Answer

Continue processing since the loan is nearly complete

Answer

Ask the borrower to provide higher income documentation retroactively

Answer

Close the loan and correct the file afterward

Question 2

Which federal law specifically prohibits mortgage professionals from accepting kickbacks or unearned fees in connection with real estate settlement services?

Accepted Answer

Real Estate Settlement Procedures Act (RESPA)

Answer

Truth in Lending Act (TILA)

Answer

Equal Credit Opportunity Act (ECOA)

Answer

Home Mortgage Disclosure Act (HMDA)

Question 3

A borrower asks their MLO to recommend a specific title company owned by the MLO's spouse. What must the MLO do first?

Accepted Answer

Disclose the affiliated business relationship in writing to the borrower

Answer

Decline to make any recommendation at all

Answer

Refer the borrower to a competitor title company

Answer

Obtain approval from the state regulator before referring

Question 4

Under the SAFE Act, an MLO who moves to a new state must:

Accepted Answer

Obtain a license in the new state before originating loans there

Answer

Immediately begin originating loans and apply for licensure within 60 days

Answer

Transfer their existing license automatically through the NMLS system

Answer

Operate under a temporary federal license for up to one year

Question 5

An MLO steers a creditworthy borrower toward a high-cost loan because it pays a higher commission. This practice is best described as:

Accepted Answer

Predatory lending

Answer

Yield spread premium compliance

Answer

Rate lock extension

Answer

Mortgage fraud by omission

Question 6

A mortgage professional who willfully violates the SAFE Act licensing requirements may face:

Accepted Answer

Civil penalties of up to $25,000 per day of violation

Answer

A written warning on the first offense only

Answer

Mandatory retraining with no monetary penalty

Answer

Suspension of license for 30 days maximum

Question 7

Which behavior best exemplifies the 'fiduciary duty' concept as applied to mortgage brokerage relationships?

Accepted Answer

Placing the borrower's financial interests above the broker's own interests

Answer

Processing loans as quickly as possible to maximize volume

Answer

Offering the lender's most profitable product to every borrower

Answer

Maintaining confidentiality of the lender's rate sheet