Ethics

Question 1

What’s the penalty for mortgage fraud?

Answer 1

$1,000,000 and or 30 years in prison.

Question 2

What are the two broad categories of mortgage fraud?

Answer 2

Fraud for housing/Fraud for profit

Question 3

What is Fraud for property/housing?

Answer 3

Involves material misrepresentation or omission of information with the intent to deceive or mislead a lender into extending credit that would likely not be offered if the true facts were known.

Question 4

Typical fraudulent activities associated with Fraud for profit?

Answer 4

appraisal fraud; fraudulent flipping; straw buyers; and identity theft.

Question 5

Material misrepresentation/misstatement

Answer 5

Implies that the financial figures that have been disclosed in the financial statement are not a true representative. It is incorrectly stating, documenting, or omitting risk factors on a mortgage application.

Question 6

A database that helps monitor and identify fraud, misrepresentation, and misconduct in the mortgage industry?

Answer 6

Mortgage Asset Research Institute (MARI)

Question 7

Predatory lending

Answer 7

Deceptive practices carried out by lenders to mislead, coerce, or assist borrowers to take out loans they are unable to afford or will be paid back at a cost that is extremely above the market rate.

Question 8

Loan flipping

Answer 8

The process of convincing a homeowner to refinance a property with high fees and providing no net tangible benefit for the borrower.

Question 9

Contract kiting

Answer 9

Occurs when a seller agrees to create a second, falsified sales agreement with an inflated purchase price so the buyer can obtain a larger loan from a lender.

Question 10

Illegal property flipping

Answer 10

Occurs when property is purchased and resold quickly at an artificially inflated price, using a fraudulently inflated appraisal.

Question 11

Builder bailout

Answer 11

Occurs when the builder or developer is determined to sell properties quickly in a down real estate market.

Question 12

What are some examples of a builder bailout Scheme?

Answer 12

● Allowing the buyer to purchase with no money down ● The builder is willing to do anything to sell property ● Incentives to the buyer are added into the sales price, which then inflates the purchase price by using an inflated appraisal

Question 13

Short sale fraud

Answer 13

A type of mortgage fraud where either false information is used or valid information is withheld to convince a homeowner to do a short sale. Short sale fraud can come from homeowners, lenders, real estate agents and brokers, or other third parties involved in the sale.

Question 14

Flopping

Answer 14

Occurs when a short sale is approved based on a misrepresentation of the value of the property.

Question 15

An air loan

Answer 15

A loan that is made to a straw buyer or a non-existent buyer, and is made on a property which is also non-existent. These are considered no-collateral loans.

Question 16

A Deed Scam

Answer 16

Occurs when someone steals the identity from the owner, then forged their signature, ultimately taking their title and then records the deed. Once that is done, they mortgage the property for cash and walk away.

Question 17

Inflated Appraisals

Answer 17

A very common part of most mortgage frauds. An appraiser agrees to inflate a property’s appraised value in order to qualify it for a bigger mortgage.

Question 18

A silent second mortgage

Answer 18

A second mortgage is placed on a property which will be used for down payment, which is not disclosed to the original lender on the first mortgage, which is why it is silent.

Question 19

A straw buyer

Answer 19

A person who applies for a mortgage and purchases a home on behalf of another person. The actual buyer may be someone with bad credit or low income, who is unable to qualify themselves.

Question 20

Straw Seller

Answer 20

A person who claims to have ownership in a property.

Question 21

Occupancy fraud

Answer 21

Occurs when the borrower lies about the occupancy status of the property, stating it will be owner-occupied when in fact, they are not living in the property.

Question 22

Bait and Switch

Answer 22

Advertising a product which seems to be a bargain, with the intention of selling an inferior item in its place or showing more expensive items instead.

Question 23

Equity Skimming

Answer 23

Involves a person, investor, or foreclosure specialist which will gain title to another person’s home to prevent a foreclosure. They will refinance the home, which takes out all the equity, and then sell it back to the borrower who will not be able to afford the new mortgage.

Question 24

Identity theft

Answer 24

Can happen in many ways, but spamming and skimming are common. Spamming involves sending emails that are meant to trick them into providing their personal information to steal their identity. Skimming occurs when the credit card machines are used to copy a bank card that is used in the machine.

Question 25

Elder Abuse

Answer 25

Happens when someone takes money or belongings from an older person. In mortgages, it occurs when a child or caregiver to an elderly homeowner convinces the elderly homeowner to obtain the loan on the home for the child or caregiver against their will.

Question 26

What are some examples of elder abuse?

Answer 26

● Forging checks ● Using someone else's retirement or Social Security benefits without their permission ● Charging a person's credit cards without their permission ● Withdrawing money from their bank accounts without their permission ● Changing names on a will, bank account, life insurance policy, or title to a house without permission