Ethics and Professional Conduct 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 Professional Conduct flashcards as text
An MLO discovers that a referral partner is paying illegal kickbacks to another originator at the same company. The ethical response is to:
Answer: Report the conduct to their compliance department or supervisor
Ethical mortgage professionals have an obligation to report known RESPA violations to their compliance department, not to conceal or ignore them.
Which of the following best defines 'churning' in the mortgage industry?
Answer: Repeatedly refinancing a borrower's loan to generate unnecessary fees
Churning refers to the unethical practice of convincing borrowers to refinance repeatedly to generate originator fees without a genuine benefit to the borrower.
A lender requires a borrower to purchase insurance from a specific provider as a condition of loan approval. This practice is called:
Answer: Tying arrangement
A tying arrangement, prohibited under RESPA and banking regulations, occurs when a lender conditions loan approval on the borrower purchasing a product from a specific affiliated provider.
Under the Dodd-Frank Act's ability-to-repay (ATR) rule, lenders must verify a borrower's ability to repay primarily through:
Answer: Documented income, assets, employment, and debt obligations
The ATR rule requires lenders to make a good-faith determination using verified income, assets, employment, credit history, and debt obligations.
A mortgage servicer fails to apply a borrower's payment correctly and reports the borrower as late to the credit bureaus. The borrower's remedy under the Real Estate Settlement Procedures Act includes:
Answer: Submitting a qualified written request (QWR) to the servicer
RESPA allows borrowers to submit a Qualified Written Request to dispute servicer errors, requiring the servicer to acknowledge and investigate the complaint.
An MLO fails to disclose a material change in loan terms before closing. This violates:
Answer: TRID disclosure requirements under TILA and RESPA
TRID requires that borrowers receive a revised Closing Disclosure reflecting material changes at least three business days before consummation.
Which of the following is the MOST appropriate action when an MLO suspects a borrower may be a victim of elder financial abuse in a mortgage transaction?
Answer: Pause the transaction and report concerns to the appropriate authorities or Adult Protective Services
MLOs who suspect elder financial abuse should halt the transaction and report concerns to authorities such as Adult Protective Services or law enforcement.