Loan Officer Practice Exam

If an appraiser intentionally underestimates an appraisal value to keep neighborhood values low, which law is being violated?

1. Fair Housing Act

2. Fair Credit Reporting Act

3. Equal Credit Opportunity Act

4. Truth in Lending Act

The correct answer is: Truth in Lending Act

The situation described involves an appraiser deliberately undervaluing a property, which can mislead buyers and financial institutions about the true worth of real estate. This scenario violates the Truth in Lending Act. This law promotes informed borrowing by ensuring that borrowers receive accurate information regarding credit costs, including the proper value of collateral, which in this case is the property being appraised. When an appraiser intentionally misrepresents the value of a property, it undermines the accuracy of information that is crucial for fair lending practices. This not only affects individual buyers and sellers but also impacts the overall integrity of real estate transactions and the housing market. The Truth in Lending Act mandates honesty in the valuation process, as inflated or deflated appraisals can lead to discriminatory practices and unfair lending terms. In contrast, the other laws mentioned focus on different aspects of lending and housing equity. The Fair Housing Act addresses discriminatory practices in housing based on race, color, religion, sex, national origin, familial status, and disability. The Fair Credit Reporting Act governs the accuracy and privacy of information in consumer credit reporting. The Equal Credit Opportunity Act prohibits discrimination in credit transactions. While these laws are essential for maintaining fairness and equality in housing and lending, the scenario specifically addresses the issue