NMLS Mortgage Fraud Prevention and Risk Management 2

Question 1

What does 'appraisal fraud' involve in a mortgage transaction?

Accepted Answer

Deliberately inflating or deflating a property's appraised value to benefit a party in the transaction

Answer

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.

Question 2

'Equity stripping' is a predatory mortgage fraud scheme in which:

Accepted Answer

Excessive fees and charges are loaded onto a loan, systematically depleting the borrower's home equity

Answer

Equity stripping involves predatory lenders piling on fees and refinancing costs that consume a homeowner's accumulated equity, leaving them financially worse off.

Question 3

Under the Bank Secrecy Act, Currency Transaction Reports (CTRs) must be filed for cash transactions exceeding:

Accepted Answer

$10,000

Answer

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.

Question 4

In mortgage fraud, 'chunking' refers to:

Accepted Answer

Convincing investors to purchase multiple properties simultaneously using fraudulent loans and concealed kickbacks

Answer

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.

Question 5

Which action constitutes 'structuring' under federal anti-money laundering laws?

Accepted Answer

Breaking up large cash transactions into smaller amounts specifically to avoid the $10,000 CTR reporting threshold

Answer

Structuring (also called 'smurfing') is the illegal act of deliberately keeping transactions below reporting thresholds to avoid Currency Transaction Report filing requirements.

(NMLS) National Mortgage Licensing System Practice Test

(NMLS) National Mortgage Licensing System Practice Test

NMLS Mortgage Fraud Prevention and Risk Management 2