Which of the following best describes a material fact

1) Which one of these classes of people is protected under the Fair Housing Act but not under the Equal Credit Opportunity Act:

A. Race

The correct answer is C. This is correct.

2) Which one of these classes of people is protected under the Equal Credit Opportunity Act but not under the Fair Housing Act:

A. Age

The correct answer is A. This is correct. Because ECOA deals with the granting of credit, some of the issues about protected classes are different than those guaranteed under the Fair Housing Act. ECOA also protects issues of martial status, whether or not the borrower is or has been the recipient of public assistance, and whether they have ever exercised their rights under the Consumer Credit Protection Act.

3) Which of the following would be considered violations of the Fair Housing Act if they are based on membership in a protected class:

A. Refusing to provide information regarding loans

The correct answer is D. A lender certainly might decline to make a loan or offer less favorable terms and conditions if based on the borrower’s qualifications, but these distinctions could not be made based on membership in a protected class.

4) Which of the following best describes the violation known asblockbusting:

A. Directing buyers to non-integrated neighborhoods based on their ethnicity

The correct answer is C. Yes, this is the violation known as blockbusting.

5) Which of the following best describes the violation known assteering:

A. Directing buyers to non-integrated neighborhoods based on their ethnicity

The correct answer is A. This is correct. This is done in residential neighborhoods for both purchasing and renting.

6) Which of the following best describes the violation known asredlining:

A. Directing buyers to non-integrated neighborhoods based on their ethnicity

The correct answer is B. This would mean that no one living in a certain grid could get a loan regardless of their qualifications.

7) The Fair Housing Act prohibits discrimination when advertising lending and other services associated with residential transactions. Which of the following would therefore be required under the Fair Housing Act:

A. In broadcast ads, lenders must include the slogan “equal housing lender”

The correct answer is D. Yes, all of these are required under the Fair Housing Act.

8) Which of the following laws was passed by Congress in 1977 to combat redlining:

A. Equal Credit Opportunity Act (ECOA)

The correct answer is B. The specific purpose of this law was to reduce discriminatory credit practices against low-income neighborhoods.

9) The Community Reinvestment Act (CRA) falls under the supervision of which of the following agencies:

A. Board of Governors of the Federal Reserve System (FRB)

The correct answer is D. True, as well as Office of the Comptroller of the Currency (OCC).

10) All of the following are true statements about the Community Reinvestment Act (CRA) except:

A. It requires a periodic evaluation of an insured depository institution’s lending record

The correct answer is C. No such quota is required.

11) Which of the following is true of the Home Mortgage Disclosure Act of 1975:

A. Its purpose is to fully disclose terms and conditions of the loan

The correct answer is D. This is correct.

12) The Home Mortgage Disclosure Act of 1975 applies to which of the following institutions:

A. Institutional depository lenders with assets in excess of $39 million

The correct answer is D. Yes, this is correct.

13) When reports of all loans made during the year are reviewed in accordance with the requirements of the Home Mortgage Disclosure Act of 1975, how are the loans categorized:

A. According to the size of the loans

The correct answer is B. This way, cases of redlining can be discovered more easily.

14) Which of the following describe fraud:

A. Misrepresentation

The correct answer is D. Yes, all of these terms refer to fraud.

15) Which of the following represent the two categories of fraud:

A. Voluntary and involuntary

The correct answer is C. This is correct. Actual fraud is with the intent to deceive. Constructive fraud is negligence. Though the perpetrator did not intend to deceive, the client is still placed at a disadvantage.

16) Which of the following statements best describes mortgage fraud:

A. It usually amounts to inflating a borrower’s income a little bit

The correct answer is B. This is correct.

17) What level of crime does mortgage fraud attain:

A. It is a serious violation of federal law and a felony

The correct answer is A. Yes, serious indeed.

18) In what ways could borrowers participate in a mortgage fraud scheme:

A. They could lie on applications

The correct answer is D. Yes, this is correct.

19) Which of the following would be a tactic employed by a lender or mortgage broker in a mortgage fraud scheme:

A. Conceal the true nature of a borrower’s down payment

The correct answer is A. Yes, this would be the act of a lender or mortgage broker.

20) Which of the following would be the most effective way for an appraiser to inflate the value of the subject property in an appraisal:

A. Lower the condition of the subject property to fair when it’s really good

The correct answer is B. Newer or higher-priced comps would definitely create adjustments that would inflate the indicated value of the subject property. This is one of the good reasons for FNMA guidelines regarding maximum net and gross adjustments that an appraiser should use.

21) Which of the following fraudulent actions would attorneys most likely take to perpetrate fraud:

A. Act as a straw buyer

The correct answer is C. Yes, this would most likely be attributed to an unscrupulous attorney.

22) Which of the following best indicates a straw buyer:

A. One who purchases a property for another so as to conceal the identity of the true buyer

The correct answer is D. Some of these functions are legitimate—some are fraudulent. “A” and “C” can be legitimate. If a developer is assembling several tracts of land for a subdivision, confidentiality can be important in the acquisition. “B” however is the type of straw man that generally leads to fraud.

23) In which of the following ways might an accountant become a perpetrator of fraud:A. Falsifying tax returnsB. Phony profit and loss statementsC. Providing false balance sheet

D. Any of the above

The correct answer is D. Yes, an accountant could provide these and other false documents.

24) In which of the following ways might a title company be involved in a fraud scheme:

A. Title companies are not usually involved in fraud schemes

The correct answer is B. This and creating false chains of title.

25) In which of the following ways might a government worker be involved in a fraud scheme:

A. Falsifying deeds or other records

The correct answer is A. This is correct.

26) In which of the following ways could a real estate agent participate in a fraud scheme:

A. Arranging for a straw buyer

The correct answer is D. Yes, making false information appear true through phony documentation is worth something in a fraud scheme.

27) In which of the following ways could rehabbers and FSBO flippers participate in a fraud scheme:

A. Use substandard materials in rehabbing a property

The correct answer is D. Yes, the techniques and strategies are as deep as the imagination.

28) The “deed scam” fraud scheme involves which of the following:

A. Reinstate the suspension without a hearing

The correct answer is A. Yes, correct according to B&P Code 10175.2.

29) What is wrong with the buyer giving the seller a silent second?

A. The first lien holder thinks the new buyer has greater equity in the property

The correct answer is A. This puts the seller at greater risk in case of default and the first lien holder is uninformed about it.

30) Which of the following describes the scheme known as “double sold loans”:

A. An investor funds a loan and then sells the loan at a discount to another investor

The correct answer is C. This is correct.

31) Which of the following is the most likely victim of illegal flipping:

A. Lender

The correct answer is C. This is most likely the party paying too much for a property of possibly substandard quality.

32) All of the following are characteristic of illegal flipping except:A. Using out of area lenders to handle the loan because they are unfamiliar with the real estate market in that areaB. Selecting properties from subdivisions that show a high level of conformityC. A series of sales and quick resales

D. The property is often appraised at a much higher price than its original purchase price with no justification​

The correct answer is B. Actually, the properties often are part of mixed value areas where higher-priced homes are located near lower-priced homes.

33) All of the following are practices designed to reduce illegal flipping, except:

A. On FHA loans for resales ranging from 91-180 days, there must be a second appraisal that matches a resale threshold percentage set by HUD

The correct answer is C. Yes, this is not a required practice to reduce illegal flipping.

34) What is the most serious consequence of an inflated appraisal scheme:

A. The appraiser participating in such a scheme makes extra money to produce dishonest results

The correct answer is D. The result is that higher-than-market values appear justified. Without analyzing every appraisal, even honest appraisers cannot tell the difference.

35) Which of the following is the primary purpose of the Home Valuation Code of Conduct (HVCC) of 2009:

A. To ensure that appraisers are not coerced into giving false pre-determined values on properties

The correct answer is A. Yes, this was the intended purpose of the HVCC.

36) The Home Valuation Code of Conduct (HVCC) applies to which of the following transactions:

A. All loans

The correct answer is B. This is correct.

37) As a red flag to mortgage fraud, what is wrong with the buyer not having to provide any money at closing:

A. This practice doesn’t suggest that anything is wrong

The correct answer is C. Yes, this is the concern.

38) The Federal Financial Institutions Examination Council (FFIEC) publishes information about red flags of mortgage fraud. All of the following would be considered a red flag of mortgage fraud except:

A. Stated income

39) What is the problem if, at closing, funds are paid to undisclosed third parties:

A. There may be debt not revealed in the closing statement

The correct answer is D. Yes, this is correct. A closing statement that is not precisely followed is a red flag to the borrower that all has not been disclosed.

40) All of the following practices are common in today’s marketplace, except:A. The seller receives cash from the sale of the propertyB. The buyer receives cash back upon closingC. The seller pays some of the buyer’s closing costs

D. The escrow instructions match the sales price and stipulations of the sales contract​

The correct answer is B. This would be an unusual practice and raise a red flag about mortgage fraud.

41) Which of the following agencies files Suspicious Activity Reports (SARs):

A. Federally insured financial institutions

The correct answer is A. SARs reports are also filed out of HUD’s Office of the Inspector General and further complaints are filed with the FBI by the mortgage industry at large.

42) Which of the following are elements of predatory lending:

A. Frequent refinancing that does not benefit the borrower

The correct answer is D. Yes, all of these and other prohibited acts comprise the practice known as predatory lending.

43) All of the following statements are generally true about subprime lending, except:

A. Subprime loans are sometimes made to low-income and risky borrowers

The correct answer is D. Not at all. Subprime loans are perfectly legitimate in the right circumstance. It is up to the MLO to make a loan that the borrower can afford to repay. A subprime loan gives a borrower with less than perfect credit the opportunity to enter the housing market.

44) Which of the following practices would be forbidden according to the Statement on Subprime Mortgage Lending written jointly by the financial regulatory agencies:A. Making loans predominantly on the liquidation value of the property rather than the borrower’s ability to repayB. Concealing from an unsophisticated borrower the true nature of a loan obligationC. Coercing a borrower to repeatedly refinance, providing fat fees for the mortgage broker, but sucking the equity right out of the house

D. All of the above​

The correct answer is D. Yes, all of these practices would miss the mark of integrity and professionalism.

45) When an adjustable rate mortgage (ARM) is offered to a subprime borrower, what are the concerns of the financial regulatory agencies as expressed in the Statement on Subprime Mortgage Lending:

A. Low initial payments based on a fixed introductory rate that expire shortly and adjust to a variable index rate plus a margin

The correct answer is D. The authorities do not want the borrow to get in trouble and not be able to repay the loan. Other concerns are substantial prepayment penalties and product features that will result in frequent refinancing to maintain an affordable monthly payment.

46) According to the Statement on Subprime Mortgage Lending, consumers should be informed on which of the following issues before committing to a loan:A. The terms and conditions of prepayment penaltiesB. The existence of any balloon paymentsC. Potential payment increases after introductory rates expire

D. All of the above​

The correct answer is D. Yes, as well as how much a reduced-documentation loan is costing them, and the responsibility for paying taxes and insurance.

47) Which of the following terms applies to potential payment increases after an introductory fixed rate expires:

A. Blockbusting

The correct answer is B. Yes, this involves knowing about the amount of the payment increases and how the new payment is calculated when the introductory rate expires.

48) Which of the following best describes the practice known as “extreme lending”:

A. Excessive prepayment penalties that discourage a borrower from paying off a loan

The correct answer is C. This puts the borrower at greater risk and almost ensures that they will not be able to repay their new mortgage loan.

49) Which of the following practices describe “equity skimming”:

A. A rescuing buyer takes out a mortgage for the homeowner, but evicts after the homeowner fails to make a payment

The correct answer is D. Yes, all of these are variations of the scheme known as “equity skimming.”

50) When is loan flipping not really loan flipping:

A. When only a little equity is removed from the property

The correct answer is B. Yes, this is the key.