Professional Ethics and Conduct Flashcards

An MLO learns a borrower's income on the application was inflated by the borrower's employer at the borrower's request. What is the most ethical response?

Answer: Refuse to submit the inflated information and require accurate documentation

Knowingly submitting false information is fraud, so the MLO must require accurate documentation.

Under RESPA Section 8, which payment is generally permissible?

Answer: A bona fide payment for services actually performed

Section 8 allows payments for goods or services actually provided at reasonable value, but bans payments for referrals.

A loan originator's compensation may NOT be based on which of the following?

Answer: The terms of the transaction, such as the interest rate

Regulation Z prohibits compensating originators based on loan terms or proxies for those terms.

An applicant speaks limited English and asks for help understanding disclosures. What best reflects ethical conduct?

Answer: Help the applicant understand the terms honestly without misleading them

Ethical MLOs ensure borrowers understand material terms and avoid deceptive practices.

Which federal law requires financial institutions to explain their information-sharing practices and safeguard customer data?

Answer: Gramm-Leach-Bliley Act

GLBA requires privacy notices and safeguarding of nonpublic personal information.

An MLO receives a gift card worth a large amount from a real estate agent after sending the agent's client to a particular settlement provider. This is most likely:

Answer: A possible RESPA Section 8 violation

Anything of value given in exchange for referring settlement service business can violate Section 8.

Which action best describes steering that is prohibited under the loan originator rules?

Answer: Directing a borrower to a loan primarily because it pays the MLO more

Steering a consumer to a loan because it increases the originator's compensation is prohibited.