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P5-16 Quiz

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Question 1 of 7

1. Question
Which action is an example of income fraud in a mortgage application?
- A) Forgetting to list a small credit card on the application
- B) Failing to sign the initial loan estimate
- C) Requesting a shorter loan term to reduce total interest
- D) Forging or altering W-2s, tax returns, or bank records to support inflated income
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Question 2 of 7

2. Question
Which IRS form does a lender typically submit to help counteract income fraud?
- A) Form 1003, Uniform Residential Loan Application
- B) Form 4506-T, Request for Transcript of Tax Returns
- C) Form W-9, Request for Taxpayer Identification Number
- D) Form 1040, Individual Income Tax Return
Correct

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Question 3 of 7

3. Question
Why does a lender request a tax return transcript using Form 4506-T?
- A) To calculate the borrower’s future property tax obligations
- B) To verify the borrower’s current interest rate
- C) To verify the income reported on the borrower’s previous two years of tax returns
- D) To estimate the borrower’s retirement income
Correct

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Question 4 of 7

4. Question
After obtaining tax transcripts, what does the lender do to detect income fraud?
- A) Compares IRS transcript amounts with the income documentation provided by the borrower
- B) Asks the borrower to reapply with a different lender
- C) Orders an additional property appraisal
- D) Waives income verification if the credit score is high
Correct

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Question 5 of 7

5. Question
What is a key characteristic of employment fraud?
- A) Borrower fails to list all prior employers
- B) Borrower understates their monthly debt payments
- C) Borrower omits seasonal income from the application
- D) Borrower provides fraudulent employer information backed by fake pay stubs and W-2s
Correct

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Question 6 of 7

6. Question
What is typically the first step a loan processor takes to detect employment fraud?
- A) Ordering a new credit report
- B) Going to the internet to verify that the borrower’s employer is a legitimate business
- C) Automatically denying the loan if income seems too high
- D) Asking the borrower to provide additional personal references
Correct

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Question 7 of 7

7. Question
Which combination of steps helps detect employment fraud?
- A) Rely solely on the borrower’s written employment statement
- B) Review the borrower’s credit score only
- C) Use only automated underwriting findings
- D) Verify employer online, complete a VOE, and match IRS transcript income to W-2s
Correct

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