Ethics

Ethical Conduct, Fair Lending & Advertising

The other half of ethics is everyday conduct: honesty with borrowers, conflicts of interest, fair treatment, truthful advertising, RESPA-safe relationships, privacy and staying within your license. Most questions ask what the MLO should do.

Ethics4 min read8 sections

Must-know for the exam

Tell borrowers the truth, including your own mistakes; never backdate or alter records.
Disclose conflicts of interest, such as owning the property or family ties to a provider.
Treat similar applicants the same; discouraging applicants on a prohibited basis violates ECOA (12 CFR 1002.4(b)).
Unfair, deceptive and abusive practices are banned; 'abusive' includes exploiting a consumer's lack of understanding (12 U.S.C. 5531).
Ads with trigger terms need full disclosures; never imply government affiliation (12 CFR 1026.24; 12 CFR 1014.3).
Social-media business posts are advertising and need the NMLS ID (Model State Law).
No payments, gifts or shared marketing that reward referrals; pay fair value for real services (12 CFR 1024.14).
You may ask an appraiser to correct errors or consider more comps, never to hit a value (12 CFR 1026.42(c)).
Protect borrower data: secure systems, no personal devices, shred old files (16 CFR 314, 682).
Only licensed MLOs take applications and quote terms; never use another person's NMLS ID.

On this page · 8 sections

Traps that cost marks

Hiding or delaying news of the MLO's own mistake instead of telling the borrower now.
Hiding a personal stake in the transaction.
Assuming no disclosure is needed when no money changes hands.
Thinking a legal product cannot be steered into unethically.
Thinking fair lending applies only to credit decisions.
Treating paternalistic 'advice' as harmless.
Discounting income or asking about family plans because of pregnancy.
Equating 'abusive' with 'expensive'.

Why it matters on the test

Ethics questions describe an ordinary day: a real estate agent's request, a borrower's tip, a social-media post, a confused elderly borrower. The best answer protects the borrower, follows the law and is honest, even when it costs the MLO business.

The rule: honesty and conflicts

•Disclose material facts and correct your own errors promptly.
•Disclose conflicts of interest and follow company policy, which may mean handing the file to someone else.
•Present suitable options and explain costs and risks so the borrower decides; do not steer for higher pay (12 CFR 1026.36(e)).
•Qualify on the fully amortizing payment and explain payment shock (12 CFR 1026.43(c)(5)).
•Keep pre-approval letters and marketing claims accurate.

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