Ethics
Ethics
This domain tests professional conduct: honesty, fair dealing, confidentiality, conflicts of interest, and compliance with anti-fraud and anti-kickback rules. Questions often present a pressure scenario and ask what the MLO should do.
Core standards
- Represent loan terms accurately; do not promise approval, rates, or fees you cannot support.
- Never falsify income, assets, occupancy, or property information, and never coach a borrower to misstate facts.
- Do not steer borrowers to a product because it pays more; present options and document the borrower's choice.
- Protect nonpublic personal information under GLBA and the licensee's privacy policy.
- Refuse undisclosed referral fees, gifts, or marketing payments tied to settlement-service referrals; RESPA Section 8 applies.
- Identify and escalate red flags: altered documents, straw buyers, undisclosed debts, and elder financial exploitation.
Worked example
A title company offers an LO $500 for every refinance referral. The LO accepts and does not disclose it. This is a RESPA Section 8 prohibited kickback and an ethics violation. The LO should decline, report the offer through the company's compliance channel, and document the interaction. Borrower consent does not cure the violation.
Traps
Everyone does it is not a defense. A disclosed conflict is not automatically permissible. A gift card, event ticket, or marketing payment can be a thing of value. Borrowers cannot authorize fraud. A sales script that implies guaranteed approval is a misrepresentation even if the final disclosure is accurate.