During a state-law refresher, a policy analyst identifies an issue involving SAR escalation and anti-tipping rules. Which response is most compliant?
Correct Answer
D) Follow SAR timing and confidentiality procedures
Why this is correct: Suspicious Activity Report (SAR) regulations require filing within strict timelines and maintaining absolute confidentiality to avoid "tipping off" the subject of the report. The most compliant response is to adhere precisely to these procedures. Why the other choices are wrong: "Apply the high-cost loan timing rule even though the file is testing Fraud Detection and Reporting" is wrong because high-cost loan rules are distinct from SAR procedures; applying the wrong rule is non-compliant. "Ignore the consumer-protection issue unless the borrower complains" is wrong because SAR obligations are mandatory and not dependent on a complaint. "Document the issue later instead of correcting the compliance problem first" is wrong because SAR filing deadlines are critical; delay can itself be a violation. Exam tip: For SAR questions, the correct answer will always involve following the specific reporting procedures and protecting confidentiality.
Why This Is the Correct Answer
The correct response is "Follow SAR timing and confidentiality procedures" because SAR rules require reporting or escalation of suspicious activity and prohibit tipping off subjects.
Why the Other Options Are Wrong
Option A: Apply the high-cost loan timing rule even though the file is testing Fraud Detection and Reporting.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option C: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
SAR escalation and anti-tipping rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to SAR escalation and anti-tipping rules; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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?
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