Professional Ethics and Conduct Flashcards

A borrower asks the MLO to hide a pending second mortgage from the lender so the borrower can qualify. What should the MLO do?

Answer: Decline and ensure all debts and liens are accurately disclosed

Concealing liens or debts is material misrepresentation and potential mortgage fraud.

How many hours of NMLS-approved continuing education are required annually for a state-licensed MLO, including ethics?

Answer: 8 hours with 2 ethics

Annual CE is 8 hours: 3 federal law, 2 ethics, 2 non-traditional lending, and 1 elective.

Which practice could violate fair lending laws through redlining?

Answer: Refusing to market or lend in a neighborhood based on its racial or ethnic makeup

Redlining is avoiding lending in areas because of the demographics of residents.

An MLO's relative owns an appraisal firm and the MLO wants to order the appraisal there. What is the best ethical practice?

Answer: Disclose the conflict of interest and follow appraiser independence requirements

Conflicts of interest must be disclosed and appraiser independence preserved.

Which action constitutes unfair, deceptive, or abusive acts or practices (UDAAP)?

Answer: Taking unreasonable advantage of a consumer's lack of understanding of material risks

Abusive practices include taking unreasonable advantage of a consumer's lack of understanding.

Under Regulation Z, how long must a creditor retain evidence of compliance with loan originator compensation rules?

Answer: 3 years

Records of loan originator compensation must be kept for three years after the transaction.

An MLO becomes aware that a coworker is falsifying borrower documents. What is the most appropriate action?

Answer: Report the conduct through proper compliance channels

Ethical MLOs report suspected fraud to compliance or regulators rather than ignoring it.