Ethics
Core duties
An MLO owes candor, confidentiality, and fair dealing. Say what you can deliver: advertising "about 5%" when pricing is 6.5% is deceptive under UDAAP and the Texas Deceptive Trade Practices Act. Never sign for a borrower, never backdate a document, and never "improve" income or asset figures. Stated-income fraud is still fraud when the borrower suggests it.
Kickbacks and steering
RESPA §8 bans fees, gifts, or anything of value for referrals of settlement services. A marketing services agreement must pay fair market value for services actually performed, not for referrals; paying a real estate agent $300 per closed loan is a violation no matter what the invoice says. Steering a borrower into a higher-cost loan to increase your compensation is both a LO Comp Rule problem and an ethics problem.
Fair lending
ECOA and the Fair Housing Act bar discrimination on prohibited bases. Redlining, discouraging applicants, and varying terms without a business justification are violations. Consistent, documented pricing and underwriting is your best defense.
Fraud red flags
Undisclosed debts, altered bank statements, a sudden unexplained job change, a "consultant" who supplies documents, and a purchase price that jumps at closing. Escalate; do not close.
Worked example
A title company offers to pay an MLO $150 for each borrower referred to it. Accepting is prohibited under RESPA §8 because the payment is for the referral and no service is being performed.
Rule of thumb
If the payment stops when the referrals stop, it is a kickback.