Ethics
What this domain tests
Ethics questions test honesty, fair dealing, referrals, conflicts, fraud, privacy, and the standards an MLO must follow when compensation or a third party creates pressure.
Core rules
- No referral fees: RESPA Section 8 prohibits fees or things of value for referrals of settlement services. A 'marketing services agreement' is lawful only if it pays fair market value for actual services, not for sending business.
- Fair lending: Do not vary terms, service, or discouragement based on race, color, religion, sex, national origin, familial status, disability, age, or another prohibited basis.
- Fraud: Never help falsify income, assets, occupancy, or appraisal information. Document borrower intent, but do not coach misrepresentation.
- Privacy: Use GLBA safeguards; share nonpublic personal information only as permitted.
- Compensation: LO pay cannot be based on interest rate, fees, or other transaction terms except loan amount; steering to a higher-cost loan for higher pay is prohibited.
- Conflicts: Disclose outside relationships and do not let real estate agents, builders, or title companies control borrower choices unlawfully.
Worked example
A title company offers an MLO $500 for every closing referred. The MLO discloses the payment to the borrower and to the lender. It is still a RESPA Section 8 violation because the payment is for a referral, not for bona fide services at fair market value. Disclosure and borrower consent do not cure a kickback.
Traps
'Everyone does it' is not a defense. A disclosed fee is not automatically lawful. Marketing agreements are not a loophole. Steering can be subtle: discouraging a borrower from shopping or from a cheaper product for a higher commission is still a violation. Do not treat borrower-provided documents as verified without review.