Ethics and Fraud Prevention Flashcards
7 cards from real Mortgage practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics and Fraud Prevention flashcards as text
A 'chunking' scheme in real estate involves an investor convincing lenders to finance multiple properties simultaneously by:
Answer: Hiding the multiple simultaneous loan applications from each lender
In chunking, an investor hides simultaneous loan applications from each lender to avoid debt-to-income ratio disqualification, constituting fraud.
Under the Dodd-Frank Act, which rule prohibits mortgage loan originators from receiving compensation based on the interest rate or other loan terms?
Answer: The Loan Originator Compensation rule
The Loan Originator Compensation rule under Dodd-Frank prohibits compensation tied to loan terms like interest rate, preventing steering incentives.
A homeowner facing foreclosure is approached by a company promising to save their home if they temporarily sign the deed over to the company. This is an example of:
Answer: Foreclosure rescue fraud / deed theft
Foreclosure rescue fraud involves convincing distressed homeowners to sign over their deed under false pretenses, often resulting in permanent loss of the home.
Which statement best describes the ethical obligation of a mortgage professional regarding a borrower's non-public personal information (NPI)?
Answer: It must be protected and only used for the purpose it was collected
Under the Gramm-Leach-Bliley Act and professional ethics standards, NPI must be safeguarded and used only for the purposes disclosed to the borrower.
A loan officer who fabricates employment verification documents for a self-employed borrower without the borrower's knowledge is:
Answer: Committing fraud regardless of the borrower's innocence
Fabricating documents makes the loan officer a fraud perpetrator regardless of whether the borrower was aware; the originator bears full criminal liability.
Which of the following is a red flag that a purchase transaction may involve mortgage fraud?
Answer: The property is being sold far above comparable neighborhood values with an immediate resale
A property sold significantly above market value with an unusually quick turnaround is a classic red flag for illegal property flipping or inflated appraisal fraud.
Predatory lending practices are prohibited primarily because they:
Answer: Exploit vulnerable borrowers with unfair, deceptive, or abusive loan terms
Predatory lending is prohibited because it targets and exploits vulnerable borrowers — including seniors and low-income individuals — with unfair, deceptive, or abusive terms.