Mortgage Ethics and Professional Conduct 5

Question 1

An MLO discovers that a referral partner is paying illegal kickbacks to another originator at the same company. The ethical response is to:

Accepted Answer

Report the conduct to their compliance department or supervisor

Answer

Ignore it as it does not involve their own transactions

Answer

Confront the referral partner directly and resolve it privately

Answer

Wait to see if regulators discover it on their own

Question 2

Which of the following best defines 'churning' in the mortgage industry?

Accepted Answer

Repeatedly refinancing a borrower's loan to generate unnecessary fees

Answer

Rapidly processing multiple loan applications to meet quotas

Answer

Switching borrowers between lenders to obtain better rates

Answer

Originating loans above the conforming loan limit consistently

Question 3

A lender requires a borrower to purchase insurance from a specific provider as a condition of loan approval. This practice is called:

Accepted Answer

Tying arrangement

Answer

Force-placed insurance mandate

Answer

Hazard insurance bundling

Answer

Collateral protection requirement

Question 4

Under the Dodd-Frank Act's ability-to-repay (ATR) rule, lenders must verify a borrower's ability to repay primarily through:

Accepted Answer

Documented income, assets, employment, and debt obligations

Answer

The borrower's self-certification of income

Answer

The property's appraised value as collateral

Answer

The borrower's credit score alone

Question 5

A mortgage servicer fails to apply a borrower's payment correctly and reports the borrower as late to the credit bureaus. The borrower's remedy under the Real Estate Settlement Procedures Act includes:

Accepted Answer

Submitting a qualified written request (QWR) to the servicer

Answer

Immediate cancellation of the mortgage contract

Answer

Filing a claim directly with the credit bureaus only

Answer

Withholding future payments until the error is corrected

Question 6

An MLO fails to disclose a material change in loan terms before closing. This violates:

Accepted Answer

TRID disclosure requirements under TILA and RESPA

Answer

Only the lender's internal policies

Answer

The Fair Credit Reporting Act (FCRA)

Answer

The Community Reinvestment Act (CRA)

Question 7

Which of the following is the MOST appropriate action when an MLO suspects a borrower may be a victim of elder financial abuse in a mortgage transaction?

Accepted Answer

Pause the transaction and report concerns to the appropriate authorities or Adult Protective Services

Answer

Complete the transaction since the borrower appears willing

Answer

Require additional documentation and proceed if provided

Answer

Refer the case to the lender's underwriting department only