What must a Mortgage Loan Officer do after obtaining knowledge of potential fraud from a borrower?

After becoming aware of potential fraud from a borrower, the appropriate action for a Mortgage Loan Officer is to notify their supervisor or compliance officer. This course of action is crucial because it ensures that the issue is escalated and properly managed according to the institution’s policies and regulatory requirements.

Notifying a supervisor or compliance officer allows for a coordinated response to investigate the potential fraud, which may involve reviewing the borrower’s application, verifying documentation, and possibly contacting law enforcement or regulatory bodies if needed. This step also protects the institution from potential legal ramifications associated with facilitating fraudulent activity.

In contrast, contacting a lawyer may be necessary later on but is not the immediate action required. Closing the loan immediately would be inappropriate and could exacerbate the situation. Documenting the conversation is also important for record-keeping but is not a substitute for notifying the appropriate authority within the organization when potential fraud is identified.