A policy analyst compares the file facts with Truth in Advertising during a borrower follow-up call. Which conclusion is accurate?
Correct Answer
B) Remove the misleading approval or savings claim
Why this is correct: Truth in advertising rules, primarily under Regulation Z, prohibit misleading claims in mortgage advertising. Claims about loan approval, savings, rates, or payments must be clear, conspicuous, and not deceptive. If a claim is misleading, the required action is to correct the advertisement by "Remove the misleading approval or savings claim" to achieve compliance. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because advertising rules protect the public generally; borrower willingness does not cure a misleading ad. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the lender has an affirmative duty to ensure its ads are compliant, regardless of complaints. "Use prior appraisal review approval as a substitute for the current Truth in Advertising requirement" is wrong because appraisal review is a separate process with different standards and does not address advertising content. Exam tip: For advertising compliance, the presence of a misleading claim mandates its removal. Do not rely on borrower reaction or other unrelated approvals.
Why This Is the Correct Answer
The correct response is "Remove the misleading approval or savings claim" because Mortgage advertising must avoid misleading claims and satisfy APR/trigger-term rules.
Why the Other Options Are Wrong
Option A: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option C: 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 D: Use prior appraisal review approval as a substitute for the current Truth in Advertising requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
mortgage advertising compliance: 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 mortgage advertising compliance; 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 file escalation meeting, the supervisor sees facts tied to RESPA Kickbacks and Referrals. What should the file reflect?
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?
An applicant has verified monthly income of $5,000 and monthly obligations of $4,700 after the proposed mortgage payment. The applicant expects an undocumented raise next year. What should the MLO do?
A lender bases approval entirely on the home's high appraised value and does not verify the borrower's income or existing debts. What is the central compliance concern?
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?
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?
To obtain approval, an MLO changes a self-employed applicant's verified monthly income from $6,000 to $9,000 without supporting documentation. How should this conduct be characterized?
A homeowner is encouraged to refinance for the third time in 18 months. Each loan generates new points and fees, while the borrower's payment and rate do not improve. Which practice is most strongly indicated?
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