2014 Red Flags Quiz

Explanation
The statement is false because even though the Retail Originators are considered as employees of the SPM company, they still need to address the Red Flag issues discussed in the training session. Being part of the company does not exempt them from following the necessary protocols and guidelines to ensure compliance and prevent any potential fraudulent activities.

Explanation
This statement is false because it is important for individuals to be educated on various fraud schemes and red flag issues, regardless of their manager's responsibilities. Being aware of these issues can help individuals identify and prevent fraud in their own work and contribute to maintaining a safe and ethical work environment. Therefore, it is not solely the manager's responsibility to be educated on these matters.

Explanation
This statement is incorrect because documentation that appears to be altered or manipulated should be questioned. It is important to ensure the authenticity and accuracy of the information provided to maintain good customer service and avoid any potential issues or misunderstandings.

Explanation
This statement is false because even if a loan is not located in an area identified by FNMA Fraud Finding Statistics, it is still important to review loan files for red flag or fraud issues. Fraud can occur in any location, and it is crucial to thoroughly review loan files to identify any potential signs of fraud or red flags, regardless of the area.

Explanation
The statement is false because identifying a red flag issue does not automatically mean that fraudulent activity is present in the loan file. While red flags may indicate potential fraud, further investigation is required to confirm the presence of fraudulent activity. Red flags serve as warning signs that prompt lenders or investigators to dig deeper and gather more evidence before concluding whether fraud has occurred. Therefore, the presence of a red flag does not guarantee the presence of fraud.

Explanation
The statement suggests that with declining loan volume, fraudulent activities are almost extinct and there is no need for concern. However, this assumption is incorrect. Fraudulent activities can still occur even with declining loan volume. It is important to remain vigilant and take necessary precautions to prevent and detect fraud, regardless of the loan volume. Therefore, the correct answer is False.

Explanation
The statement is false because even if the loan application is fully completed, signed, and dated, red flag issues and potential fraud can still be a concern. Completing the application does not guarantee the absence of fraudulent activities or red flags. Lenders and loan originators need to thoroughly review the application and verify the information provided to ensure its accuracy and legitimacy. Failure to do so can result in approving fraudulent loans or lending to borrowers who may not be able to repay the loan.

Explanation
Occupancy issues being considered as fraud or misrepresentation is not just a pricing issue, but rather a matter of providing false information or misleading others. Therefore, the statement that occupancy issues are not considered fraud or misrepresentation is false.

Explanation
A Borrower's letter of explanation (LOE) may provide some information to address and clarify file inconsistencies and red flag issues, but it is not always the best source. Other documents such as bank statements, employment records, or credit reports may also be used to provide a more accurate and comprehensive explanation. Therefore, the statement is false.

Explanation
The statement suggests that asking for additional information that is not required by the AUS system would lead to over-documenting the loan file and providing poor customer service. The correct answer is False because it is acceptable to ask for additional information if it is necessary for the loan process and does not result in over-documentation or poor customer service.

Explanation
The statement is false because even though pulling a credit report on borrowers can provide information about their existing debts, it does not guarantee that all undisclosed debts will be revealed. Borrowers may have debts that are not reflected in their credit report or they may intentionally hide certain debts. Therefore, it is important to consider other factors and conduct thorough due diligence to identify any undisclosed debts.

Explanation
The explanation for the correct answer, True, is that the statement suggests that there is a direct relationship between the number and severity of red flag issues in a loan file and the presence of fraud. It implies that as the number and severity of red flags increase, the likelihood of fraud being present also increases.

Explanation
Insider collusion refers to the illegal practice of individuals within an organization conspiring to gain an unfair advantage or manipulate the market. The statement suggests that this behavior has been increasing and is likely to continue to rise in the future. Therefore, the answer "True" indicates agreement with the statement that insider collusion is on the rise and can be expected to increase further.

Explanation
The term "Insiders" in the question refers to individuals who have insider knowledge or information about a particular subject. The statement states that the term "Insiders" does not include anyone employed in the mortgage industry. Therefore, the correct answer is false, as it implies that individuals employed in the mortgage industry can be considered as "Insiders" in this context.

Explanation
The statement "FBI agents rank mortgage fraud as a high priority" is false. This implies that mortgage fraud is not considered a high priority by FBI agents.