Ethics
What you must know
Ethics questions test whether you protect the borrower and the integrity of the file when it costs you the deal. Core duties: act in the borrower's interest, be accurate and transparent about rates, fees, and terms, protect nonpublic personal information under GLBA, and never let compensation shape advice. Steering a borrower into a higher-cost or less suitable product to increase compensation is the classic violation. Fraud includes inflating income or assets, misrepresenting occupancy intent, encouraging a borrower to leave debts off the application, or altering documents - borrower consent never cures it. Appraisal independence rules prohibit pressuring a valuator toward a target number.
Fair lending is an ethics issue as well as a legal one: treat similarly situated borrowers the same, and remember that disparate treatment (intentional) and disparate impact (neutral policy with unequal effect) are both scrutinized. Advertising must be accurate and include the NMLS unique identifier. Confidentiality extends to shredding, secure storage, and limiting access on a need-to-know basis.
Traps
- "The borrower asked me to" is not a defense to a falsified application.
- Gifts or referral payments from settlement service providers are RESPA and ethics problems at once.
- Waiving or discounting your own fee is generally acceptable if documented and disclosed; paying a real estate agent for a referral is not.
Rule of thumb
Ask whether you would be comfortable explaining the action to the borrower, your regulator, and a courtroom - if any answer is no, do not do it.
Worked example
A loan originator's compensation plan pays more on a higher-rate product. Presenting only that product when a lower-rate option the borrower qualifies for is available is steering, even if the borrower signs.