SAFE Ethics and Professional Conduct 2

Question 1

An MLO discovers that a borrower's income was overstated on an already-submitted application. What is the correct ethical action?

Accepted Answer

Notify the lender and correct the application immediately

Answer

Proceed with the loan since it was the borrower's error

Answer

Wait to see if underwriting catches it

Answer

Advise the borrower to maintain the overstated figure

Question 2

Under the SAFE Act, which behavior would constitute a violation of an MLO's ethical obligations?

Accepted Answer

Steering a borrower toward a higher-rate product to earn a larger commission

Answer

Disclosing all compensation arrangements to the borrower

Answer

Recommending the loan product best suited to the borrower's needs

Answer

Maintaining complete and accurate loan records

Question 3

A borrower who is a personal friend asks an MLO to skip some required disclosures to speed up closing. The MLO should:

Accepted Answer

Provide all required disclosures regardless of the borrower's relationship

Answer

Skip the disclosures as a personal favor

Answer

Delay the disclosures until after closing

Answer

Allow the borrower to waive disclosures in writing

Question 4

Which of the following best describes the duty of confidentiality for an MLO?

Accepted Answer

Protecting non-public personal information from unauthorized disclosure

Answer

Sharing borrower information freely with other lenders to find better rates

Answer

Disclosing borrower financial details to real estate agents upon request

Answer

Sharing credit reports with other borrowers as examples

Question 5

An MLO receives a referral fee from a title company for directing borrowers to use their services. This practice is:

Accepted Answer

Prohibited under RESPA Section 8 regardless of disclosure

Answer

Permitted if disclosed to the borrower

Answer

Allowed if the title company provides competitive rates

Answer

Legal as long as it does not exceed $50

Question 6

When must an MLO disclose a material conflict of interest to a borrower?

Accepted Answer

Before or at the time of the loan application

Answer

Only if the borrower specifically asks

Answer

After the loan closes to avoid alarming the borrower

Answer

Only if the conflict affects the interest rate

Question 7

An MLO who falsifies a borrower's employment history on a loan application could face:

Accepted Answer

Criminal charges for mortgage fraud, fines, and license revocation

Answer

Only a minor administrative warning

Answer

A temporary suspension of 30 days

Answer

No penalty if the loan performs well