Shared Flashcard Set

Details

NMLS Ethics and Fraud
Ethics and Fraud
20
Real Estate & Planning
Not Applicable
09/04/2012

Additional Real Estate & Planning Flashcards

 


 

Cards

Term
If a coworker knowingly omits child support payments from a client's loan application, what is the best course of action?
A. Ask him how you might get in on the deal in order to make a profit from altered income documents too.
B. Pull your friend aside and tell him that he needs to be a little more careful hiding his document alterations because the manager might see him doing it.
C. Set up a conference with the manager and explain what you believe you saw happening.
D. Call law enforcement and report the incident of loan fraud.
Definition
C.
Term
Define predatory lending (this may seem obvious, but there's a group of words and phrases that have similar sounding definitions)
Definition
The variety of unethical and in some cases illegal practices that are intended to strip wealth or income from unwary borrowers.
Term
What should lenders and borrowers be on the lookout for when it comes to predatory lenders.
Definition
Unduly high fees.
Hidden payment terms.
Loss of equity in a home.
Hidden and unnecessary credit insurance packing.
Mortgage service abuses.
Attempts to convince the consumer to sign over the deed to his home.
Term
Define steering.
Definition
A situation where a consumer is encouraged or "steered" by the lender to a certain product with higher rates and fees.

Note: Some sources estimate that up to half of subprime mortgage borrowers could have qualified for loans with better terms.
Term
Define packing.
Definition
The practice of adding unwanted extras to the loan without the full knowledge or understanding of the borrower.
Term
What is the most common product packed (ethics) into mortgages?
Definition
Credit insurance.
Term
What is the issue with failure to report borrower credit information?
Definition
When borrowers make timely payments, they deserve "credit" for that punctuality. If you don't report it, you're inevitably costing them money.
Term
Define reverse redlining.
Definition
A situation when predatory lenders seek out vulnerable or undeserved groups to push subprime products upon.
Term
What are examples where predatory lenders lend to people who cannot afford the loan?
Definition
1. Inducing future business.
2. Equity stripping.
3. Falsified loan applications
4. Adding co-signers
5. Mentally incapacitated homeowners
6. Forgeries.
Term
Define contract knavery
Definition
A situation when the predatory lender sneaks a burdensome provision into the loan contract without the borrower's knowledge.
Term
What is most often cited in cases of contract knavery?
Definition
Prepayment penalties.
Term
Define price gouging.
Definition
A situation when a vendor takes advantage of the consumer by charging high prices either through fraudulent acts or because the consumer has no other alternative.
Term
What are examples of price gouging?
Definition
1. Excessive fees.
2. Unfairly high interest rates.
3. large Yield Spread Premiums.
Term
who runs the Housing Fraud Initiative Task Force?
Definition
HUD and the FBI
Term
Define "mortgage fraud"
Definition
material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.
Term
What does the FBI use to compile data on mortgage fraud?
Definition
Suspicious Activity Reports (SARs)
Term
__% of all fraud reported losses involve collaboration or collusion by industry insiders.
Definition
80%
Term
What is a quitclaim deed?
Definition
a legal instrument by which the owner of a piece of real property, called the grantor, transfers his or her interest to a recipient, called the grantee
Term
What is churning?
Definition
a form of illegal property flipping where a buyer and seller repetitively transfer ownership to create fictitious equity.
Term
What is a "silent second"
Definition
A scheme where house sellers accept second mortgages as part of a sale transaction without the full knowledge of the first mortgage lender.
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