A borrower qualifies for two otherwise identical closed-end dwelling-secured loans available through a mortgage broker: 6.25% paying the broker 1 point, and 6.75% paying 2 points. Solely to earn more, the broker presents only the second as likelier to be approved. The borrower consummates it, with no offsetting consumer benefit. Does this violate Regulation Z’s anti-steering rule?
Correct Answer
D) Steering: he directed her to the 6.75% loan for his own 2 points
D. The broker steered the borrower into the higher-paying transaction against the borrower’s interest. The facts now establish consummation, increased compensation and no consumer-interest justification. Scope and exceptions: Higher compensation alone is not conclusive. Consumer interest matters; presentation without consummation is not this completed steering violation, although other rules may apply. Source: Comments 36(e)(1)-1 and -2 — https://www.consumerfinance.gov/rules-policy/regulations/1026/interp-36/
Why This Is the Correct Answer
D. The broker steered the borrower into the higher-paying transaction against the borrower’s interest. The facts now establish consummation, increased compensation and no consumer-interest justification. Scope and exceptions: Higher compensation alone is not conclusive. Consumer interest matters; presentation without consummation is not this completed steering violation, although other rules may apply.
Why the Other Options Are Wrong
Option A: Steering only if she later learns the 6.25% loan was available to her
Later discovery is not required.
Option B: Permitted, provided the 6.75% rate is disclosed on the loan estimate
Rate disclosure does not cure the steering.
Option C: Permitted: presenting the likeliest approval is a judgment call
Both loans were available and the motive was compensation.
Exam Tip
Check consummation, compensation motive and consumer interest.
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