Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: Ethics
OVERVIEW
Ethical behavior must be consistently applied at every touchpoint in the origination process — from the initial inquiry through post-closing. This lesson covers the specific ethical obligations that arise at each stage of the loan process and how MLOs should handle challenging situations with integrity.
- Ethical Obligations at Initial Contact
- Provide accurate information about loan products, rates, and fees — never misrepresent to attract a borrower
- Do not provide false pre-qualifications to encourage borrowers to make offers on properties they cannot afford
- Be honest about what products the borrower does and does not qualify for
- Do not discourage borrowers from applying based on protected characteristics — that is a ECOA violation
- Ethical Obligations During Application
- Do not encourage or assist a borrower in misrepresenting any information on the 1003
- Do not falsify or allow others to falsify any documentation in the loan file
- Explain each section of the application clearly so the borrower understands what they are signing
- Ensure demographic information is handled properly — kept separate from the credit decision
- Do not ask prohibited questions — birth control, family planning, marital status (in most circumstances)