Mortgage Underwriting, Documentation, and Fraud Prevention
The Underwriting File
Understand what a complete file contains: application, credit report, income verification, down payment and source-of-funds evidence, property documents, and disclosure forms. Know the difference between A-lending and alt-documentation, and why lenders require an audit trail. Understand title insurance, status certificates for condominiums, and the role of the solicitor in confirming title and registration.
Fraud Prevention
Candidates must recognize common fraud schemes: income or employment falsification, straw buyers, appraisal inflation, identity theft, undisclosed secondary financing, and property-flipping rings. Red flags include inconsistent documents, unusual urgency, a purchaser unrelated to the transaction, down payment funds from an unexplained third party, and documents that look altered. Know the licensee's duty to report suspected fraud to the brokerage and principal broker, and to refrain from participating in or facilitating misrepresentation.
Traps in Exam Questions
Questions often test whether an agent should "help" a borrower qualify by suggesting inflated income - the answer is always no. Watch for confusion between a genuine gift letter and a borrowed down payment, and for scenarios where an agent is asked to hold back a material fact from the lender. Also watch for the requirement that documents be verified at source where required.
Rule of Thumb
If a document cannot be independently verified, treat it as unverified, not as true.
Worked example: A borrower supplies an employment letter on letterhead but the phone number reaches a personal cell. The agent must verify employment independently and escalate to the principal broker rather than submit the file.