MLO ETHICS QUIZ WITH COMPLETE
SOLUTIONS (ALREADY PASSED)
You have completed the necessary Pre-licensure education, testing, and application
requirements to obtain your mortgage license. You have been hired by a brokerage and
expect your background check to clear shortly. You have a friend who is eager to
proceed with a loan application and your manager at the brokerage has said that you
can start the file under his/her name, then switch it back to your name once your license
arrives. This action is: - Answer- illegal and unethical.
This is considered unlicensed activity and is prohibited under the SAFE Act. Not only
would you be in trouble, but your manager would also be considered to be aiding and
abetting your unlicensed activity.
Your customer calls you in the morning and tells you to lock the interest rate at the 5.5%
you initially disclosed. You commit to lock the rate, but your day becomes busy and you
aren't able to lock it until later in the day. When you go to lock the rate, you notice that
the pricing has changed since this morning and the rate of 5.5% is now going to cost an
additional $500.00. What is the most appropriate course of action? - Answer- Pay the
$500 cost and lock the rate
This would be a cost that would be covered by the lender as it was not the borrower's
fault that you became busy.
A lender has a minimum loan amount that they will lend on, that minimum loan amount
is $150,000. The average home value to a minority in the neighborhood is $100,000, so
the lender does not help anyone in that minority lender, this would be: - Answer-
Disparate impact
Disparate Impact occurs when a facially neutral policy or practice is applied equally to
all applicants, but the policy or practice disproportionately excludes or burdens certain
groups of people on a prohibited basis.
A potential borrower calls you for rates and programs. Assume that they are on the
DNC Registry. You are allowed to call them back for what period of time? - Answer- 3
months
Under the Do Not Call Provision, an MLO can solicit a prospective client who submits
an inquiry or application for up to 3 months even if they are on the DNC list. If this was a
, previous client who the MLO had an established business relationship this goes up to
18 months.
A borrower is looking to purchase a new home, this new home is smaller than their
current home and less expensive. They tell the MLO that they intend to sell their current
home once they've gotten a new home. The borrower closes on their new home and
promptly defaults on their old home, this is called: - Answer- Buy and Bail
A buy and bail is when a homeowner is current on their mortgage, but the value of their
home has fallen below the amount owed, also known as being underwater, so they
apply for a purchase money mortgage on another home. After the new property has
been secured, the borrower will allow the first home to go into foreclosure (i.e., bail on
that previous property).
If fraud is discovered by the servicer, what is LEAST likely to occur? - Answer- The
borrower will experience a rate increase
The servicer has multiple options if fraud is discovered on a loan. Most commonly it
goes back to the originating entity to buyback and deal with the fraudulent loan.
A borrower wants to purchase a second home and tells you that they intend to rent the
property out when they are not living in it. You have reviewed their financial information
and realize that the borrower would qualify for financing if the property is classified as a
second residence. However, if the property is classified as an investment property, the
borrower is unlikely to qualify. What should you do? - Answer- Classify the property as a
rental property even though the borrower intends to reside there part of the year.
If the borrower plans on using the property in any capacity as a rental property, it needs
to be considered an investment property.
What rule made it illegal to charge upfront fees and requires disclosures in ads for
mortgage assistance relief providers? - Answer- The MARS Rule
The Mortgage Assistance Relief Services Rule or the MARs Rule made it illegal to
charge upfront fees and requires specific disclosures in ads for mortgage assistance
relief providers. These rules protect distressed borrowers from foreclosure rescue
schemes.
You have a customer who has been approved by the lender and is ready to close. The
customer backs out at the last minute because of a recent interest rate drop and opts to
go with a different loan officer. You paid for the appraisal and want to invoice the
customer and be reimbursed. This course of action would be considered: - Answer-
Legal and ethical
It is legal for you to recoup third party fees that you've paid if the loan does not close
because of the customer.
SOLUTIONS (ALREADY PASSED)
You have completed the necessary Pre-licensure education, testing, and application
requirements to obtain your mortgage license. You have been hired by a brokerage and
expect your background check to clear shortly. You have a friend who is eager to
proceed with a loan application and your manager at the brokerage has said that you
can start the file under his/her name, then switch it back to your name once your license
arrives. This action is: - Answer- illegal and unethical.
This is considered unlicensed activity and is prohibited under the SAFE Act. Not only
would you be in trouble, but your manager would also be considered to be aiding and
abetting your unlicensed activity.
Your customer calls you in the morning and tells you to lock the interest rate at the 5.5%
you initially disclosed. You commit to lock the rate, but your day becomes busy and you
aren't able to lock it until later in the day. When you go to lock the rate, you notice that
the pricing has changed since this morning and the rate of 5.5% is now going to cost an
additional $500.00. What is the most appropriate course of action? - Answer- Pay the
$500 cost and lock the rate
This would be a cost that would be covered by the lender as it was not the borrower's
fault that you became busy.
A lender has a minimum loan amount that they will lend on, that minimum loan amount
is $150,000. The average home value to a minority in the neighborhood is $100,000, so
the lender does not help anyone in that minority lender, this would be: - Answer-
Disparate impact
Disparate Impact occurs when a facially neutral policy or practice is applied equally to
all applicants, but the policy or practice disproportionately excludes or burdens certain
groups of people on a prohibited basis.
A potential borrower calls you for rates and programs. Assume that they are on the
DNC Registry. You are allowed to call them back for what period of time? - Answer- 3
months
Under the Do Not Call Provision, an MLO can solicit a prospective client who submits
an inquiry or application for up to 3 months even if they are on the DNC list. If this was a
, previous client who the MLO had an established business relationship this goes up to
18 months.
A borrower is looking to purchase a new home, this new home is smaller than their
current home and less expensive. They tell the MLO that they intend to sell their current
home once they've gotten a new home. The borrower closes on their new home and
promptly defaults on their old home, this is called: - Answer- Buy and Bail
A buy and bail is when a homeowner is current on their mortgage, but the value of their
home has fallen below the amount owed, also known as being underwater, so they
apply for a purchase money mortgage on another home. After the new property has
been secured, the borrower will allow the first home to go into foreclosure (i.e., bail on
that previous property).
If fraud is discovered by the servicer, what is LEAST likely to occur? - Answer- The
borrower will experience a rate increase
The servicer has multiple options if fraud is discovered on a loan. Most commonly it
goes back to the originating entity to buyback and deal with the fraudulent loan.
A borrower wants to purchase a second home and tells you that they intend to rent the
property out when they are not living in it. You have reviewed their financial information
and realize that the borrower would qualify for financing if the property is classified as a
second residence. However, if the property is classified as an investment property, the
borrower is unlikely to qualify. What should you do? - Answer- Classify the property as a
rental property even though the borrower intends to reside there part of the year.
If the borrower plans on using the property in any capacity as a rental property, it needs
to be considered an investment property.
What rule made it illegal to charge upfront fees and requires disclosures in ads for
mortgage assistance relief providers? - Answer- The MARS Rule
The Mortgage Assistance Relief Services Rule or the MARs Rule made it illegal to
charge upfront fees and requires specific disclosures in ads for mortgage assistance
relief providers. These rules protect distressed borrowers from foreclosure rescue
schemes.
You have a customer who has been approved by the lender and is ready to close. The
customer backs out at the last minute because of a recent interest rate drop and opts to
go with a different loan officer. You paid for the appraisal and want to invoice the
customer and be reimbursed. This course of action would be considered: - Answer-
Legal and ethical
It is legal for you to recoup third party fees that you've paid if the loan does not close
because of the customer.
