Ethics
What this domain tests
Judgment: fair dealing, UDAAP, fraud prevention, conflicts of interest, confidentiality, and truthful advertising. Expect scenarios where the compliant answer documents, discloses, and declines the improper shortcut.
Core duties
- Fair dealing and UDAAP: do not misrepresent costs, terms, or approval odds; do not obscure material terms; do not use pressure tactics aimed at vulnerable borrowers.
- Anti-fraud: never inflate income, assets, occupancy, or value. Occupancy fraud-claiming a primary residence for a second home or investment property-is a common exam scenario. Appraisal independence means no pressure on the appraiser to hit a target value.
- Conflicts and referrals: referral fees among settlement-service providers violate RESPA Section 8; marketing arrangements must pay fair market value for actual services.
- Confidentiality: nonpublic personal information may be used only for permissible purposes; sharing with marketing partners requires proper notice and opt-out.
- Advertising: include the NMLS unique identifier and required disclosures; do not advertise rates or terms that are unavailable.
Worked example
A real estate agent offers to send every buyer to a loan officer in exchange for $250 per closed loan. The LO should decline: the arrangement is a payment for referrals under RESPA Section 8 and cannot be cured by disclosure. A compliant alternative is a co-marketing arrangement at fair market value with documented services, reviewed by compliance.
Traps
- Believing disclosure cures a prohibited kickback.
- Rationalizing inflated income because "the borrower will make it work."
- Using application data for unrelated marketing without consent.
- Advertising a "no-cost" loan without required disclosures.