Ethics and Professional Standards in Mortgage Banking Flashcards

Under the MBA's Code of Ethics, a CMB-certified professional must disclose which of the following to clients at the point of application?

Answer: All material fees, terms, and the nature of the lender's compensation

Ethical standards require full disclosure of material fees, loan terms, and compensation arrangements so borrowers can make informed decisions.

Which federal law most directly prohibits mortgage professionals from engaging in discriminatory lending practices based on race, color, religion, sex, or national origin?

Answer: Fair Housing Act (FHA)

The Fair Housing Act explicitly prohibits discrimination in residential real estate transactions, including mortgage lending, based on protected class status.

A mortgage banker who steers a qualified borrower toward a subprime loan when the borrower qualifies for a prime product is engaging in which prohibited practice?

Answer: Reverse redlining

Reverse redlining (also called predatory steering) involves targeting qualified borrowers with unfair or high-cost products they don't need, often targeting minority communities.

Under MBA professional ethics guidelines, a mortgage banker who discovers a potential conflict of interest with a client should FIRST:

Answer: Disclose the conflict to all relevant parties and obtain informed consent

Disclosure and obtaining informed consent from all affected parties is the required first step when a conflict of interest is identified, allowing parties to decide how to proceed.

Which of the following best describes the concept of 'fiduciary duty' as it applies to mortgage bankers acting as brokers?

Answer: A legal duty to act in the best financial interest of the client above one's own interests

A fiduciary duty obligates a mortgage broker to prioritize the client's best financial interest over their own, including recommending the most suitable loan product.

The Home Mortgage Disclosure Act (HMDA) requires lenders to collect and report loan data primarily to:

Answer: Help identify potential discriminatory lending patterns and ensure fair lending

HMDA data is collected to allow regulators and the public to identify potential discriminatory or predatory lending patterns by analyzing loan approval rates across demographic groups.

A CMB professional receives a referral fee from a title company for directing clients to that company. Under RESPA Section 8, this arrangement is:

Answer: Prohibited because it constitutes an unearned kickback

RESPA Section 8 prohibits giving or accepting referral fees or kickbacks for settlement services unless actual services are provided in exchange, protecting borrowers from inflated costs.