1. You work for a mortgage lender that really encourages you to sell ARM loans to your clients. In fact, if 75% of the loans you close each month are ARM loans, you receive a very nice bonus. You have a customer on the phone that you don’t feel understands ARM loans very well despite all your efforts. He tells you repeatedly that he would be better off with a 30-year fixed rate mortgage. You proceed to take his application and send all the required documentation to him for a 5/1 ARM. He signs the documents and returns them to you. You process his loan and close it 30 days later.
A. Do you feel you ethically assisted your borrower with this loan?
B. What could you have done differently?
2. You have a co-worker at work that you are also friends with. One day, a borrower comes in and meets with him. You overhear the borrower tell your co-worker that he has a loan with his mom and dad for about $10,000 that he pays $300 a month. Your co-worker proceeds as if he didn’t hear your borrower at all. Once he has taken the application, he tells the borrower that he qualifies for maximum financing for a $250,000 home. However, that does not take into consideration the $300 a month the borrower pays his parents for the loan.
A. Did your coworker do anything unethical in this transaction?
B. Assuming you feel this was an unethical situation, how do you handle this?

Well in this case i don't feel i have ethically assisted by borrower because the type of loan my costumer requested from me is the 30-year fixed rate mortgage but because of the bonus i will gain from closing ARM loan i sent him/her the documentation to him for a 5/1 ARM loan even though he has told me repeatedly that he would be better off with the 30-year fixed rate mortgage

B

What i would have done differently was to be more patient and explain him the benefits of the ARM loan and the if he / she insists that he still want the 30-year fixed rate mortgage, then i would have sent him /her the documentation for the 30-year fixed rate mortgage.

2

A

Yes my co-worker acted in an unethical manner by not recognizing the fact that the costumer is servicing another loan with $300 a month and then proceeding to qualify him/her for a maximum financing of $250,000 which will would increase the risk in the current transaction

B

Since i feel this is unethical, the next step i will take is to call my co-worker aside and bring to his notice the fact that the borrower is servicing another loan with $300 per month , and then i will ask my co-worker to bring this fact into consideration when determine his maximum financing which in this case he has to reduce , then if my co-worker does not agree with my advice then in order to ensure that the company does not loss funds i will call in a higher authority in the company.

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