MLO Ethics Practice Questions (Fraud, Fair Lending, UDAAP)

Updated October 20, 2026

This area is 18% of the SAFE MLO test, about ~21 of the 115 scored questions. Below are 10 free practice questions written from the laws it covers, each with the answer, an explanation, and its source.

What this area covers

Ethics questions are often scenarios. Ask yourself what the law requires, not what would close the loan.

Weights are from the NMLS content outline. Question counts are our arithmetic (weight × 115).

10 practice questions

1. A Fair Housing Act complaint may be filed with HUD within:
  1. 30 days
  2. 10 years
  3. 5 years
  4. 1 year after the alleged discriminatory housing practice
Show answer and explanation

Answer: D. 1 year after the alleged discriminatory housing practice
Correct — 42 U.S.C. §3610(a)(1)(A)(i).

Source: 42 U.S.C. 3610(a)(1)(A)(i)

2. A private civil action under the Fair Housing Act generally must be filed within:
  1. 90 days
  2. 1 year
  3. 6 years
  4. 2 years after the alleged discriminatory practice
Show answer and explanation

Answer: D. 2 years after the alleged discriminatory practice
Correct — 42 U.S.C. §3613(a)(1)(A).

Source: 42 U.S.C. 3613(a)(1)(A)

3. Steering a borrower of a protected class toward a higher-cost loan product they don't need is an example of:
  1. Proper risk-based pricing
  2. Required counseling
  3. A safe harbor practice
  4. Disparate treatment
Show answer and explanation

Answer: D. Disparate treatment
Correct — treating someone differently because of a prohibited basis violates ECOA and the FHA.

Source: 12 CFR 1002.4(a)

4. A neutral policy that applies to everyone but has a disproportionate negative effect on a protected class, without a legitimate business justification, may be:
  1. Redlining by definition
  2. Blockbusting
  3. Disparate impact discrimination
  4. Always legal
Show answer and explanation

Answer: C. Disparate impact discrimination
Correct — recognized under the Reg B commentary and the FHA.

Source: 12 CFR 1002.6(a) (effects test)

5. Targeting minority neighborhoods with high-cost, predatory loan products is known as:
  1. Redlining
  2. Risk-based pricing
  3. Fair lending
  4. Reverse redlining
Show answer and explanation

Answer: D. Reverse redlining
Correct.

Source: 42 U.S.C. 3605(a)

6. Persuading owners to sell by saying a protected class is moving into the neighborhood is:
  1. Blockbusting
  2. Steering
  3. Redlining
  4. Appraisal fraud
Show answer and explanation

Answer: A. Blockbusting
Correct — 42 U.S.C. §3604(e).

Source: 42 U.S.C. 3604(e)

7. Under Dodd-Frank, an act or practice is "unfair" if it causes or is likely to cause substantial injury that:
  1. Is legal under state law
  2. Is disclosed in fine print
  3. Consumers can't reasonably avoid and that isn't outweighed by benefits to consumers or competition
  4. Affects only one consumer
Show answer and explanation

Answer: C. Consumers can't reasonably avoid and that isn't outweighed by benefits to consumers or competition
Correct — 12 U.S.C. §5531(c).

Source: 12 U.S.C. 5531(c)(1)

8. Under Dodd-Frank, an "abusive" practice includes one that:
  1. Offers adjustable-rate loans
  2. Takes unreasonable advantage of a consumer's lack of understanding of a product's material risks, costs, or conditions
  3. Requires a credit check
  4. Charges any fee
Show answer and explanation

Answer: B. Takes unreasonable advantage of a consumer's lack of understanding of a product's material risks, costs, or conditions
Correct — 12 U.S.C. §5531(d).

Source: 12 U.S.C. 5531(d)(2)(A)

9. Which agency has primary authority to enforce UDAAP against non-bank mortgage lenders?
  1. FEMA
  2. The IRS
  3. The FDIC only
  4. The CFPB
Show answer and explanation

Answer: D. The CFPB
Correct — 12 U.S.C. §5531 and §5536.

Source: 12 U.S.C. 5531(a); 5536

10. Knowingly making a false statement on a loan application to influence a federally insured institution can be punished by up to:
  1. $500 and 30 days
  2. A $1,000,000 fine and 30 years in prison
  3. Only a license suspension
  4. A warning letter
Show answer and explanation

Answer: B. A $1,000,000 fine and 30 years in prison
Correct — 18 U.S.C. §1014.

Source: 18 U.S.C. 1014

Practice with every question

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Official sources

FAQ

How much of the MLO exam is ethics?

18%, about 21 of 115 scored questions (our arithmetic from the NMLS outline weight).

What ethics topics are tested?

Fair lending, fraud, consumer protection (UDAAP), advertising, and referral fees, per the NMLS content outline.

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