A Fannie Mae seller funds loans originated through 14 brokers. It relies on their licenses, has no effective third-party management procedures, and reviews only two files when specifically asked each year. Does this satisfy Fannie Mae’s third-party origination management requirements?
Correct Answer
B) Deficient: the seller retains responsibility to Fannie Mae for outsourced functions and must maintain effective oversight
B. Licensing does not replace effective third-party management. Fannie Mae requires written approval and management procedures, including ongoing checks of compliance and qualifications. The defect is the stated absence of effective oversight, not a universal rule that reviewing exactly two files is always inadequate. Scope and exceptions: This concerns the seller’s Fannie Mae obligations. It does not decide liability under every statute or prescribe a universal sample size. Source: A3-3-01, Third-Party Originations; Management Procedures — https://selling-guide.fanniemae.com/sel/a3-3-01/outsourcing-mortgage-processing-and-third-party-originations
Why This Is the Correct Answer
B. Licensing does not replace effective third-party management. Fannie Mae requires written approval and management procedures, including ongoing checks of compliance and qualifications. The defect is the stated absence of effective oversight, not a universal rule that reviewing exactly two files is always inadequate. Scope and exceptions: This concerns the seller’s Fannie Mae obligations. It does not decide liability under every statute or prescribe a universal sample size.
Why the Other Options Are Wrong
Option A: Sufficient, since each of the 14 brokers holds its own license
A license is one input to approval and monitoring, not a substitute.
Option C: Deficient only where a broker has been sanctioned by a regulator
Oversight is preventive; a prior sanction is not required.
Option D: Sufficient, because the 2 reviewed files were found compliant
Two compliant files do not establish an effective management system.
Exam Tip
Outsourcing work does not outsource the seller’s oversight responsibility.
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During intake, a borrower asks whether the company will file a suspicious activity report. What is the best compliant response?
Next Question
A processor recognises the appraiser’s photographs as being from a different address she worked on last month. She is not sure she is right. What should she do with the doubt?