For a consumer loan secured by the borrower’s principal dwelling, a lender obtains independent valuations of $505,000 and $530,000. Documented analysis supports the $530,000 valuation as more reliable, rather than simply desirable for approval. Under the valuation-independence rule, may the lender select it?
Correct Answer
B) Permitted: obtaining 2 valuations and using the more reliable is allowed
B. Multiple valuations may be obtained to select the most reliable one. Reliability, not a preferred loan-approval value, is the stated basis for selection. The applicable permitted action is section 1026.42(c)(3)(iv), not (v). Scope and exceptions: This does not authorize coercion or misrepresentation, or excuse separate appraisal-copy delivery and investor requirements. Source: Section 1026.42(c)(1)–(3), particularly (c)(3)(iv) — https://www.consumerfinance.gov/rules-policy/regulations/1026/42/
Why This Is the Correct Answer
B. Multiple valuations may be obtained to select the most reliable one. Reliability, not a preferred loan-approval value, is the stated basis for selection. The applicable permitted action is section 1026.42(c)(3)(iv), not (v). Scope and exceptions: This does not authorize coercion or misrepresentation, or excuse separate appraisal-copy delivery and investor requirements.
Why the Other Options Are Wrong
Option A: Prohibited unless the borrower is given both valuations before consummation
Copy-delivery duties are separate from this valuation-selection permission.
Option C: Prohibited: ordering a 2nd valuation is value shopping in every case
A second valuation is not automatically prohibited.
Option D: Permitted only where the 2 figures differ by less than 5% of the lower one
The section does not impose the proposed 5% difference limit.
Exam Tip
Select for supported reliability, not the number needed to close.
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
A team member spots what may be a fabricated comparable and raises it with the originator, who explains it away. She accepts the explanation and closes the file. What should she have done instead?
Next Question
A customer-service escalation raises a Fraud Prevention question for a closing coordinator. What answer should guide the file?