Ethics
Core Ethical Duties
Ethics questions test integrity, fairness, confidentiality, and transparency. Originators must act in the borrower's interest, avoid deceptive practices, protect nonpublic personal information, and refuse to participate in fraud-even when pressured by a supervisor or referral partner.
Prohibited Conduct
- Fraud and misrepresentation: inflating income, altering documents, or coaching borrowers to misstate facts.
- Steering and kickbacks: directing borrowers to affiliated services for undisclosed benefit, or accepting referral fees where prohibited.
- Discrimination: treating applicants differently based on protected characteristics under ECOA and the Fair Housing Act.
- Conflicts of interest: undisclosed relationships with appraisers, title companies, or realtors.
Traps
The most common trap is a scenario where "everyone does it" or a manager instructs wrongdoing. The correct answer is almost always to refuse and escalate through proper channels. Another trap confuses confidentiality with disclosure obligations-borrowers are entitled to their own information but not to others'.
Worked Example
A realtor offers a $500 gift for every loan referral. Accepting would violate RESPA Section 8 and ethical duties. The right response is to decline, document the request, and report it internally.
Rule of Thumb
Apply the "sunlight test": if the action could not be openly disclosed to the borrower and regulator, don't do it. When in doubt, disclose and document.