MLO ETHICS QUIZ 4 QUESTIONS AND
ANSWERS ALL CORRECT
When taking an application for a mortgage loan, what are creditors NOT permitted to
ask? - Answer- Do you receive child support?
Per ECOA, you cannot ask a borrower if they receive child support, you can ask them if
they have any other sources of income (like child support) that they would like
considered in their application. A borrower is not required to use their child support as
income to support their application unless they want to.
A borrower is applying for a loan to purchase a home. Under the terms of Reg Z, how
long will he have to rescind the loan after he signs it (assuming it is not a high cost
loan)? - Answer- 0 Business Days; There is no right of rescission
The right of rescission only applies on owner-occupied refinance transactions.
MLO Joe is working with a borrower and has been for six months. Joe has yet to be
able to find a loan product for this borrower, so he's decided to tell his borrower he can't
help him, but he owes him $1,000 for his time. This is a violation of: - Answer- the SAFE
Act
Under the SAFE Act, an MLO is prohibited for collecting a fee for best efforts.
Carlos is a hard-working MLO who is just shy of hitting his next tier of commission for
the month. He only needs one more loan to close so he reaches out to his underwriter,
Alexa and offers her a cut of his commission if she can get this loan and one other one
approved before the end of the week. This would be a violation of: - Answer- The SAFE
Act
Under the SAFE Act it is prohibited to bribe anyone in relation to a transaction, this can
include an underwriter, processor or an appraiser to influence them with regards to the
transaction. In this case, Carlos is bribing Alexa to influence her judgement and get her
to approve those loans.
Which law prohibits discrimination based on sex, race, age, national origin, marital
status, and source of income? - Answer- Equal Credit Opportunity Act
The protected classes under ECOA are sex, race, age, national origin, marital status
and source of income.
, The lender usually does not allow the source of a borrower's down payment to be: -
Answer- Borrowed Funds
A borrower can use their own funds or a gift of funds, but it cannot be funds borrowed or
required to be paid back.
A loan originator refers her customer to XYZ Title Company, which is owned by her
family. According to RESPA, she must: - Answer- Give full disclosure (AFBA) to the
customer when, or before, she makes the referral
RESPA requires all AfBA disclosures be made at the time of referral. Disclosing before
the referral would meet this requirement acceptably.
What type of scam is done by an MLO, who attempts to refinance a property over and
over to make more money? - Answer- Churning
Churning refers to the practice of constantly refinancing a mortgage, often times when it
is unnecessary, or offers little to no benefit to the borrower. An MLO may encourage a
homeowner to refinance their loan simply to collect the loan origination fee and/or other
fees, saddling the homeowner with more and more debt, along with a longer mortgage
term. Sometimes they will step down the interest rate a little at a time
What type of fraud involves an industry insider? - Answer- Fraud for profit
Fraud for profit may involve a group of industry insiders attempting to defraud lenders
for profit. Those who commit this type of mortgage fraud use their specialized
knowledge or authority to commit or facilitate the fraud. This collusion by industry
insiders may include mortgage loan originators, appraisers, mortgage brokers,
attorneys, or other professionals engaged in the industry.
Arlo is looking to purchase a new home, but he does not have enough income to qualify
for the home he really wants so he doctors his W-2 to show he makes more money, this
would be an example of: - Answer- Fraud for Housing
This would be an example of fraud for housing or property. Fraud for housing is
committed when a borrower materially misrepresents information on a mortgage loan
application such as employment, income, or assets to obtain a mortgage. The borrower
is motivated to acquire ownership of a house.
Of these, who is responsible for the accurate accounting of all monies due to and from
the parties in a real estate sale? - Answer- Settlement or Escrow Agent
Settlement or escrow agents are responsible for preparing all the paperwork, walking
the borrower through the closing and then ensuring all money is transferred
appropriately.
ANSWERS ALL CORRECT
When taking an application for a mortgage loan, what are creditors NOT permitted to
ask? - Answer- Do you receive child support?
Per ECOA, you cannot ask a borrower if they receive child support, you can ask them if
they have any other sources of income (like child support) that they would like
considered in their application. A borrower is not required to use their child support as
income to support their application unless they want to.
A borrower is applying for a loan to purchase a home. Under the terms of Reg Z, how
long will he have to rescind the loan after he signs it (assuming it is not a high cost
loan)? - Answer- 0 Business Days; There is no right of rescission
The right of rescission only applies on owner-occupied refinance transactions.
MLO Joe is working with a borrower and has been for six months. Joe has yet to be
able to find a loan product for this borrower, so he's decided to tell his borrower he can't
help him, but he owes him $1,000 for his time. This is a violation of: - Answer- the SAFE
Act
Under the SAFE Act, an MLO is prohibited for collecting a fee for best efforts.
Carlos is a hard-working MLO who is just shy of hitting his next tier of commission for
the month. He only needs one more loan to close so he reaches out to his underwriter,
Alexa and offers her a cut of his commission if she can get this loan and one other one
approved before the end of the week. This would be a violation of: - Answer- The SAFE
Act
Under the SAFE Act it is prohibited to bribe anyone in relation to a transaction, this can
include an underwriter, processor or an appraiser to influence them with regards to the
transaction. In this case, Carlos is bribing Alexa to influence her judgement and get her
to approve those loans.
Which law prohibits discrimination based on sex, race, age, national origin, marital
status, and source of income? - Answer- Equal Credit Opportunity Act
The protected classes under ECOA are sex, race, age, national origin, marital status
and source of income.
, The lender usually does not allow the source of a borrower's down payment to be: -
Answer- Borrowed Funds
A borrower can use their own funds or a gift of funds, but it cannot be funds borrowed or
required to be paid back.
A loan originator refers her customer to XYZ Title Company, which is owned by her
family. According to RESPA, she must: - Answer- Give full disclosure (AFBA) to the
customer when, or before, she makes the referral
RESPA requires all AfBA disclosures be made at the time of referral. Disclosing before
the referral would meet this requirement acceptably.
What type of scam is done by an MLO, who attempts to refinance a property over and
over to make more money? - Answer- Churning
Churning refers to the practice of constantly refinancing a mortgage, often times when it
is unnecessary, or offers little to no benefit to the borrower. An MLO may encourage a
homeowner to refinance their loan simply to collect the loan origination fee and/or other
fees, saddling the homeowner with more and more debt, along with a longer mortgage
term. Sometimes they will step down the interest rate a little at a time
What type of fraud involves an industry insider? - Answer- Fraud for profit
Fraud for profit may involve a group of industry insiders attempting to defraud lenders
for profit. Those who commit this type of mortgage fraud use their specialized
knowledge or authority to commit or facilitate the fraud. This collusion by industry
insiders may include mortgage loan originators, appraisers, mortgage brokers,
attorneys, or other professionals engaged in the industry.
Arlo is looking to purchase a new home, but he does not have enough income to qualify
for the home he really wants so he doctors his W-2 to show he makes more money, this
would be an example of: - Answer- Fraud for Housing
This would be an example of fraud for housing or property. Fraud for housing is
committed when a borrower materially misrepresents information on a mortgage loan
application such as employment, income, or assets to obtain a mortgage. The borrower
is motivated to acquire ownership of a house.
Of these, who is responsible for the accurate accounting of all monies due to and from
the parties in a real estate sale? - Answer- Settlement or Escrow Agent
Settlement or escrow agents are responsible for preparing all the paperwork, walking
the borrower through the closing and then ensuring all money is transferred
appropriately.
