Practice Test Geeks(NMLS) National Mortgage Licensing System Practice Test
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Mortgage Fraud Prevention and Risk Management Flashcards

7 cards from real NMLS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Mortgage Fraud Prevention and Risk Management flashcards as text

  1. What term describes a person who obtains a mortgage on behalf of another party who cannot qualify, concealing the true buyer's identity from the lender?

    Answer: Straw buyer

    A straw buyer applies for a mortgage on behalf of another person—often someone ineligible—who will actually receive the property, constituting loan fraud.

  2. Under the Bank Secrecy Act, within how many days must a Suspicious Activity Report (SAR) be filed after detecting suspicious activity involving $5,000 or more?

    Answer: 30 days

    The BSA requires financial institutions to file a SAR within 30 calendar days of initially detecting the suspicious activity.

  3. What type of mortgage fraud involves rapid resales of a property between related parties using inflated appraisals to deceive lenders?

    Answer: Illegal property flipping

    Illegal property flipping uses a sequence of staged sales and fraudulent appraisals to artificially inflate a property's apparent value before a lender funds the final loan.

  4. In mortgage fraud, an 'air loan' is best described as:

    Answer: A loan on a non-existent property with fabricated borrowers and collateral

    Air loans involve completely fictitious transactions—fake borrowers, fake properties, fake employers—leaving the lender with no real collateral whatsoever.

  5. Which of the following is a red flag that may indicate occupancy fraud on a mortgage application?

    Answer: Borrower lists a distant rental address as their intended primary residence

    Claiming a property will be owner-occupied when the borrower intends to rent it out is occupancy fraud, used to obtain more favorable interest rates and terms.

  6. What is 'income fraud' in the context of a mortgage application?

    Answer: Overstating income or falsifying employment documents to qualify for a loan

    Income fraud occurs when a borrower misrepresents their income or employment status to qualify for a mortgage they could not otherwise obtain.

  7. The Financial Crimes Enforcement Network (FinCEN) operates under which federal department?

    Answer: U.S. Department of the Treasury

    FinCEN is a bureau of the U.S. Department of the Treasury responsible for safeguarding the financial system from illicit use, including combating mortgage fraud and money laundering.