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
What does 'appraisal fraud' involve in a mortgage transaction?
Answer: Deliberately inflating or deflating a property's appraised value to benefit a party in the transaction
Appraisal fraud intentionally misrepresents a property's value—either to help a borrower qualify for a larger loan or to deceive a lender about the actual collateral securing the mortgage.
'Equity stripping' is a predatory mortgage fraud scheme in which:
Answer: Excessive fees and charges are loaded onto a loan, systematically depleting the borrower's home equity
Equity stripping involves predatory lenders piling on fees and refinancing costs that consume a homeowner's accumulated equity, leaving them financially worse off.
Under the Bank Secrecy Act, Currency Transaction Reports (CTRs) must be filed for cash transactions exceeding:
Answer: $10,000
Financial institutions must file a CTR for any cash transaction exceeding $10,000 in a single business day to help federal agencies detect money laundering.
In mortgage fraud, 'chunking' refers to:
Answer: Convincing investors to purchase multiple properties simultaneously using fraudulent loans and concealed kickbacks
Chunking involves a perpetrator recruiting investors to buy multiple properties at once, using inflated appraisals and hidden kickbacks, leaving investors holding properties worth far less than the loan amounts.
Which action constitutes 'structuring' under federal anti-money laundering laws?
Answer: Breaking up large cash transactions into smaller amounts specifically to avoid the $10,000 CTR reporting threshold
Structuring (also called 'smurfing') is the illegal act of deliberately keeping transactions below reporting thresholds to avoid Currency Transaction Report filing requirements.
Which federal law makes it a crime to use interstate wire communications in a scheme to defraud mortgage lenders?
Answer: The Wire Fraud Statute (18 U.S.C. § 1343)
The Wire Fraud Statute makes it a federal felony to use wire communications—including phone, email, or internet—as part of any scheme to defraud, including mortgage fraud.
What is a 'builder bailout' mortgage fraud scheme?
Answer: A builder inflates sales prices and provides secret concessions to buyers, deceiving lenders about the property's true market value
In a builder bailout, developers sell overpriced properties with concealed financial incentives to straw buyers, causing lenders to believe the collateral is worth significantly more than its actual value.