United States
Hong KongProhibited acts and practices
Steering, fee splitting for referrals, falsifying documents, failing to disburse funds as agreed, misrepresenting terms and unlicensed activity are the core prohibitions. Most are named in Regulation Z or the SAFE Act framework.
The ethics area is 18 percent of the paper, and a large part of it is a list of named prohibitions. Learn them as a list.
The core prohibitions
- Steering a consumer to a transaction that pays the originator more and is not in their interest
- Accepting or giving anything of value for the referral of settlement service business
- Falsifying or altering any document in the loan file
- Failing to disburse funds in accordance with a written agreement
- Misrepresenting the terms, rates or costs of a loan
- Conducting licensed activity without a license
- Influencing an appraiser to reach a value
Bait and switch
Advertising terms that are not available, or not intended to be honored, so that applicants come in and are then moved to different terms.
It reaches both Regulation Z advertising rules and the general prohibition on unfair, deceptive or abusive acts and practices.
Several of these are violations whether or not the originator meant harm. Failing to disburse funds as agreed is a breach even if the delay was administrative, and questions frequently describe a well-intentioned originator committing one.
UDAAP
Unfair, deceptive or abusive acts and practices are prohibited under the Dodd-Frank Act, which passed in 2010.
It is deliberately broad. Conduct can be abusive without breaching any specific rule, by materially interfering with a consumer's ability to understand a term, or by taking unreasonable advantage of their lack of understanding.
Unlicensed activity
Taking an application or offering or negotiating terms without a license is prohibited, and it catches people at the margins of a role.
An unlicensed assistant may collect documents and provide general information. They may not discuss rates or terms with a borrower, and the line is narrower than it feels in practice.
Common questions
What are prohibited acts for a loan originator?
Steering, fee splitting for referrals, falsifying documents, failing to disburse funds as agreed, misrepresenting terms, unlicensed activity and influencing appraisers.
What is UDAAP?
Unfair, deceptive or abusive acts and practices, prohibited under the Dodd-Frank Act of 2010. It is deliberately broad.
Does intent matter?
Often not. Several prohibitions are breached regardless of whether harm was intended.
What can an unlicensed assistant do?
Collect documents and give general information. They may not discuss rates or terms or take an application.
What is bait and switch?
Advertising terms that are not available or not intended to be honored, to attract applicants who are then moved to different terms.