MLO ETHICS PRACTICE EXAM QUESTIONS
AND ANSWERS
The Financial Privacy Rule is part of what federal act?
Truth in Lending Act
Dodd-Frank Act
Housing and Economic Recovery Act of 2008
Gramm-Leach-Bliley Act - Answer- The Gramm-Leach-Bliley Act includes a provision
known as the Financial Privacy Rule.
William changes his W-2 in an effort to win approval for his loan application to buy a
new condo. What is this considered?
fraud for profit and property
fraud for principle
fraud for a friend
fraud for profit - Answer- Fraud for profit and property
- When a borrower commits fraud in an effort to obtain ownership of a property, this is
considered fraud for property. This could also be considered profit and property if equity
is gained.
The federal Fair Housing Act is also known as
the State Civil Rights Law.
the Civil Rights Act of 1866.
Title VIII.
the ECOA. - Answer- Title VIII
- The federal Fair Housing Act of 1968 is also known as Title VIII of the Civil Rights Act.
The difference between actual fraud and constructive fraud is that actual fraud:
requires the commission of a crime.
is prohibited.
is intentional.
involves negligence. - Answer- Is intentional
- Constructive fraud is generally due to negligence, while actual fraud requires an intent
to misrepresent or conceal material facts which are known. Both are prohibited.
Misrepresentation or concealment of material facts due to negligence is:
collusion.
steering.
flipping.
fraud. - Answer- Fraud
,- Fraud is intentional or negligent misrepresentation or concealment of material facts.
Fraud also includes actively concealing information and making false or misleading
statements.
The Fair Housing Act requires lenders to display what in all branch offices?
a summary of the Fair Housing Act
a list of rights under the Fair Housing Act
a business brochure
the Equal Housing Opportunity Logo - Answer- The Equal Housing Opportunity Logo
- The Fair Housing Act requires the displaying of the Equal Housing Lender Poster,
which indicates to the public that the lender is in compliance with the Act.
Who usually commits mortgage fraud?
industry insiders
consumer borrowing money
government officials
investors - Answer- Industry Insiders
- The increased reliance by financial institutions and others on third-party mortgage
brokers has resulted in mortgage fraud at a high level, especially fraud committed by
company insiders.
The Civil Rights Act of 1866 prohibits discrimination based on:
age.
race.
marital status.
disability. - Answer- Race
- The Civil Rights Act of 1866 prohibits discrimination based on race. There are no
exceptions to this law.
Mortgage broker Kelly was accused of paying a kickback to a title company and to the
real estate agent who referred her. According to RESPA, what is the maximum criminal
penalty that can be imposed?
$24,000
$10,000
$20,000
$30,000 - Answer- $20k
- The fine per kickback can be as much as $10,000 per incident, which means that Kelly
could be facing a fine of up to $20,000 ($10,000 for each of the two violations).
Mortgage broker Gary works with his appraiser friend to get an inflated value on a
house. He then recruits his cousin Bob, who has great credit, to apply for a mortgage on
the property, even though Bob is moving to Belize and has no intention of paying off the
loan. In this case, Bob could be considered a ________ buyer.
forged
colluded
straw
, mock - Answer- Straw
- Someone who purchases a home under fraudulent pretenses for someone else
without the intention of ever occupying or making payments is a straw buyer.
Mortgage broker Carrie was eager to finish up with a customer so that she could make
her massage appointment. She was sure that the terms of the loan were right for the
customer, but still, the customer felt pressured to sign papers without feeling as though
he truly understood all of the terms. This might best be described as:
actual fraud.
constructive fraud.
negligence.
mortgage fraud. - Answer- Negligence
- Negligence is breach of legal duty resulting from carelessness, recklessness, or
incompetence. Carrie's actions, while not fraudulent, probably contribute to the public's
distrust of the mortgage industry.
MLO Sarah knows that the primary source of income for the customer sitting across
from her is public assistance, so she tells him to not waste his time applying. Sarah has
violated what law?
TILA
ECOA
HMDA
CRA - Answer- ECOA
- Under the Equal Credit Opportunity Act, a borrower whose source of income if public
assistance is entitled to undergo the same loan process as anyone else.
Fred forgets to send out some required disclosures due to a change in circumstance in
the required time frame. He backdates them before he delivers them to the borrower.
What type of fraud is this?
material misstatement
fraud by deception
misrepresentation
material omission - Answer- Misrepresentation
- Backdating documents or dates of signatures is a form of misrepresentation.
Inducing owners to sell homes by suggesting the neighborhood's ethnic or racial
composition is changing, with the implication that property values will decline, is
flipping.
counseling.
blockbusting.
redlining. - Answer- Blockbusting
- Blockbusting, also known as panic selling, is prohibited under the federal Fair Housing
Act.
Which of these situations would not violate ECOA?
Your customer's last name is Patel and you observe, "That's Indian, right?"
AND ANSWERS
The Financial Privacy Rule is part of what federal act?
Truth in Lending Act
Dodd-Frank Act
Housing and Economic Recovery Act of 2008
Gramm-Leach-Bliley Act - Answer- The Gramm-Leach-Bliley Act includes a provision
known as the Financial Privacy Rule.
William changes his W-2 in an effort to win approval for his loan application to buy a
new condo. What is this considered?
fraud for profit and property
fraud for principle
fraud for a friend
fraud for profit - Answer- Fraud for profit and property
- When a borrower commits fraud in an effort to obtain ownership of a property, this is
considered fraud for property. This could also be considered profit and property if equity
is gained.
The federal Fair Housing Act is also known as
the State Civil Rights Law.
the Civil Rights Act of 1866.
Title VIII.
the ECOA. - Answer- Title VIII
- The federal Fair Housing Act of 1968 is also known as Title VIII of the Civil Rights Act.
The difference between actual fraud and constructive fraud is that actual fraud:
requires the commission of a crime.
is prohibited.
is intentional.
involves negligence. - Answer- Is intentional
- Constructive fraud is generally due to negligence, while actual fraud requires an intent
to misrepresent or conceal material facts which are known. Both are prohibited.
Misrepresentation or concealment of material facts due to negligence is:
collusion.
steering.
flipping.
fraud. - Answer- Fraud
,- Fraud is intentional or negligent misrepresentation or concealment of material facts.
Fraud also includes actively concealing information and making false or misleading
statements.
The Fair Housing Act requires lenders to display what in all branch offices?
a summary of the Fair Housing Act
a list of rights under the Fair Housing Act
a business brochure
the Equal Housing Opportunity Logo - Answer- The Equal Housing Opportunity Logo
- The Fair Housing Act requires the displaying of the Equal Housing Lender Poster,
which indicates to the public that the lender is in compliance with the Act.
Who usually commits mortgage fraud?
industry insiders
consumer borrowing money
government officials
investors - Answer- Industry Insiders
- The increased reliance by financial institutions and others on third-party mortgage
brokers has resulted in mortgage fraud at a high level, especially fraud committed by
company insiders.
The Civil Rights Act of 1866 prohibits discrimination based on:
age.
race.
marital status.
disability. - Answer- Race
- The Civil Rights Act of 1866 prohibits discrimination based on race. There are no
exceptions to this law.
Mortgage broker Kelly was accused of paying a kickback to a title company and to the
real estate agent who referred her. According to RESPA, what is the maximum criminal
penalty that can be imposed?
$24,000
$10,000
$20,000
$30,000 - Answer- $20k
- The fine per kickback can be as much as $10,000 per incident, which means that Kelly
could be facing a fine of up to $20,000 ($10,000 for each of the two violations).
Mortgage broker Gary works with his appraiser friend to get an inflated value on a
house. He then recruits his cousin Bob, who has great credit, to apply for a mortgage on
the property, even though Bob is moving to Belize and has no intention of paying off the
loan. In this case, Bob could be considered a ________ buyer.
forged
colluded
straw
, mock - Answer- Straw
- Someone who purchases a home under fraudulent pretenses for someone else
without the intention of ever occupying or making payments is a straw buyer.
Mortgage broker Carrie was eager to finish up with a customer so that she could make
her massage appointment. She was sure that the terms of the loan were right for the
customer, but still, the customer felt pressured to sign papers without feeling as though
he truly understood all of the terms. This might best be described as:
actual fraud.
constructive fraud.
negligence.
mortgage fraud. - Answer- Negligence
- Negligence is breach of legal duty resulting from carelessness, recklessness, or
incompetence. Carrie's actions, while not fraudulent, probably contribute to the public's
distrust of the mortgage industry.
MLO Sarah knows that the primary source of income for the customer sitting across
from her is public assistance, so she tells him to not waste his time applying. Sarah has
violated what law?
TILA
ECOA
HMDA
CRA - Answer- ECOA
- Under the Equal Credit Opportunity Act, a borrower whose source of income if public
assistance is entitled to undergo the same loan process as anyone else.
Fred forgets to send out some required disclosures due to a change in circumstance in
the required time frame. He backdates them before he delivers them to the borrower.
What type of fraud is this?
material misstatement
fraud by deception
misrepresentation
material omission - Answer- Misrepresentation
- Backdating documents or dates of signatures is a form of misrepresentation.
Inducing owners to sell homes by suggesting the neighborhood's ethnic or racial
composition is changing, with the implication that property values will decline, is
flipping.
counseling.
blockbusting.
redlining. - Answer- Blockbusting
- Blockbusting, also known as panic selling, is prohibited under the federal Fair Housing
Act.
Which of these situations would not violate ECOA?
Your customer's last name is Patel and you observe, "That's Indian, right?"
