Mortgage Loan Origination - ProSchools -
Loan Fraud UPDATED ACTUAL Exam
Questions and CORRECT Answers
Lenders need adequate controls in place to ensure brokers are not compensated for incomplete or
fraudulent mortgage ___. - CORRECT ANSWER - applocations
Freddie Mac and Fannie Mae - CORRECT ANSWER - are required to report suspicious
mortgage fraud activity on a Mortgage Fraud Incident Notice (MFIN) to an examiner-in-charge.
Mortgage fraud may be investigated by - CORRECT ANSWER - FBI, HUD OIG IRS ,
postal inpection service and local agencies
Title 18 of the United States Code specifies jail terms and fines for the following crimes
associated with mortgage loan fraud: - CORRECT ANSWER - For fraud/false statements,
up to five years in jail and/or a $100,000 fine
For a false mortgage loan application, conspiracy to commit fraud, fraud/swindles or bank fraud,
up to 30 years in jail and/or a $1 million fine
Fraud for property - CORRECT ANSWER - Buyer lies about income in order to qualify ,
he might sale the property for a profit
Altering the applicant's credit history
Concealment of liabilities (i.e., the loan applicant fails to fully disclose his debts)
Use of a straw buyer (i.e., a person who purchases the property or applies for the loan in his own
name for the actual borrower and is typically paid for the use of his personally identifying
information)
Asset fraud - CORRECT ANSWER - Failing to disclose the use of a credit card (an
unsecured loan) advance as the source of a down payment
Overstating assets for a down payment or collateral for the loan
Claiming a loan for the down payment as a gift, with use of a fraudulent gift letter
,Claiming payment of an earnest money deposit that does not exist
Income and employment fraud: - CORRECT ANSWER - Overstating income and/or place
or length of employment
Reporting fictitious employment and/or other sources of income with verification provided by
co-conspirators
Lumping part-time income, bonuses and sporadic income in with salaried income
Silent second: - CORRECT ANSWER - A primary lender grants a loan to a borrower who
the lender believes has invested his own money in the down payment and closing costs.
However, the borrower has actually borrowed the needed funds from the seller secured by an
undisclosed and unrecorded (i.e., silent) second mortgage.
Air Loans - CORRECT ANSWER - (i.e., loans secured by nonexistent property ["air"],
leaving the lender without collateral): The schemer invents borrowers and properties, establishes
fake accounts for payments, and maintains custodial accounts for escrows. He may even set up
an office with a bank of telephones for verification purposes, with each phone representing the
employer, appraiser, credit agency, etc.
The types of loan fraud most commonly involving mortgage loan originators are - CORRECT
ANSWER - broker-facilitated fraud, appraisal fraud and loan application fraud. Of these,
the most common involves mortgage broker facilitation in misrepresenting, misstating or
omitting information used to underwrite a loan.
"mortgage loan originator" - CORRECT ANSWER - an individual who takes a residential
mortgage loan application and offers or negotiates terms of a residential mortgage loan for
compensation or gain.
red flags - CORRECT ANSWER - The lender is not provided with original documents
within a reasonable time.
One mortgage loan originator has originated an unusually high volume of loans with maximum
loan-to-value limits.
Numerous applications from a particular mortgage loan originator have unique similarities.
, A high volume of loans exists in the name of trustees, holding companies or offshore companies.
An unusually large number of repurchases, foreclosures, delinquencies, early payment defaults,
prepayments, missing documents, fraud, high-risk characteristics, quality control findings or
compliance problems is noted on loans processed by a particular mortgage loan originator.
An unusually large increase is noted in the overall volume of loans processed by a particular
mortgage loan originator during a short time period.
The most common types of fraud relate to loan ___. - CORRECT ANSWER -
documentation
Recent law changes have increased mortgage brokerage standards for licensing and ___. -
CORRECT ANSWER - oversight
The MARS Rule requires that records be kept for how many years?
Seven
Three
Five
Two - CORRECT ANSWER - The correct answer is D. The MARS Rule requires that
mortgage assistance relief services providers maintain records for at least two years from the date
the document is created, generated or received.
Mortgage assistance relief services include all of the following EXCEPT
purchasing a home at a trustee sale.
negotiating loan modification.
Loan Fraud UPDATED ACTUAL Exam
Questions and CORRECT Answers
Lenders need adequate controls in place to ensure brokers are not compensated for incomplete or
fraudulent mortgage ___. - CORRECT ANSWER - applocations
Freddie Mac and Fannie Mae - CORRECT ANSWER - are required to report suspicious
mortgage fraud activity on a Mortgage Fraud Incident Notice (MFIN) to an examiner-in-charge.
Mortgage fraud may be investigated by - CORRECT ANSWER - FBI, HUD OIG IRS ,
postal inpection service and local agencies
Title 18 of the United States Code specifies jail terms and fines for the following crimes
associated with mortgage loan fraud: - CORRECT ANSWER - For fraud/false statements,
up to five years in jail and/or a $100,000 fine
For a false mortgage loan application, conspiracy to commit fraud, fraud/swindles or bank fraud,
up to 30 years in jail and/or a $1 million fine
Fraud for property - CORRECT ANSWER - Buyer lies about income in order to qualify ,
he might sale the property for a profit
Altering the applicant's credit history
Concealment of liabilities (i.e., the loan applicant fails to fully disclose his debts)
Use of a straw buyer (i.e., a person who purchases the property or applies for the loan in his own
name for the actual borrower and is typically paid for the use of his personally identifying
information)
Asset fraud - CORRECT ANSWER - Failing to disclose the use of a credit card (an
unsecured loan) advance as the source of a down payment
Overstating assets for a down payment or collateral for the loan
Claiming a loan for the down payment as a gift, with use of a fraudulent gift letter
,Claiming payment of an earnest money deposit that does not exist
Income and employment fraud: - CORRECT ANSWER - Overstating income and/or place
or length of employment
Reporting fictitious employment and/or other sources of income with verification provided by
co-conspirators
Lumping part-time income, bonuses and sporadic income in with salaried income
Silent second: - CORRECT ANSWER - A primary lender grants a loan to a borrower who
the lender believes has invested his own money in the down payment and closing costs.
However, the borrower has actually borrowed the needed funds from the seller secured by an
undisclosed and unrecorded (i.e., silent) second mortgage.
Air Loans - CORRECT ANSWER - (i.e., loans secured by nonexistent property ["air"],
leaving the lender without collateral): The schemer invents borrowers and properties, establishes
fake accounts for payments, and maintains custodial accounts for escrows. He may even set up
an office with a bank of telephones for verification purposes, with each phone representing the
employer, appraiser, credit agency, etc.
The types of loan fraud most commonly involving mortgage loan originators are - CORRECT
ANSWER - broker-facilitated fraud, appraisal fraud and loan application fraud. Of these,
the most common involves mortgage broker facilitation in misrepresenting, misstating or
omitting information used to underwrite a loan.
"mortgage loan originator" - CORRECT ANSWER - an individual who takes a residential
mortgage loan application and offers or negotiates terms of a residential mortgage loan for
compensation or gain.
red flags - CORRECT ANSWER - The lender is not provided with original documents
within a reasonable time.
One mortgage loan originator has originated an unusually high volume of loans with maximum
loan-to-value limits.
Numerous applications from a particular mortgage loan originator have unique similarities.
, A high volume of loans exists in the name of trustees, holding companies or offshore companies.
An unusually large number of repurchases, foreclosures, delinquencies, early payment defaults,
prepayments, missing documents, fraud, high-risk characteristics, quality control findings or
compliance problems is noted on loans processed by a particular mortgage loan originator.
An unusually large increase is noted in the overall volume of loans processed by a particular
mortgage loan originator during a short time period.
The most common types of fraud relate to loan ___. - CORRECT ANSWER -
documentation
Recent law changes have increased mortgage brokerage standards for licensing and ___. -
CORRECT ANSWER - oversight
The MARS Rule requires that records be kept for how many years?
Seven
Three
Five
Two - CORRECT ANSWER - The correct answer is D. The MARS Rule requires that
mortgage assistance relief services providers maintain records for at least two years from the date
the document is created, generated or received.
Mortgage assistance relief services include all of the following EXCEPT
purchasing a home at a trustee sale.
negotiating loan modification.
