A mortgage team asks an audit analyst about ECOA and Regulation B during a file review. Which answer should guide the file?
Correct Answer
D) Evaluate credit without prohibited-basis discrimination
Why this is correct: The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B have a foundational prohibition against discrimination in any aspect of a credit transaction. The governing concept is that creditors cannot discriminate against applicants on a prohibited basis such as race, color, religion, national origin, sex, marital status, age, etc. The correct answer, "Evaluate credit without prohibited-basis discrimination," is the core principle that must guide any file review. Why the other choices are wrong: The choice "Use the changed-circumstance standard to decide the ECOA Adverse Action Notice issue before confirming the trigger facts" is wrong because the "changed-circumstance" standard relates to fee tolerance in the Loan Estimate under TRID/TILA-RESPA rules, not to ECOA adverse action determinations. The choice "Wait until a regulator asks for the file before applying the federal requirement" is wrong because ECOA compliance is mandatory and must be applied during the transaction, not deferred. The choice "Rely on oral agreement when the rule requires documented compliance" is wrong because ECOA requires specific written adverse action notices and other documentation; oral agreements are insufficient. Exam tip: ECOA/Reg B's central rule is anti-discrimination. Always start your analysis with this principle when a question involves credit evaluation.
Why This Is the Correct Answer
The correct response is "Evaluate credit without prohibited-basis discrimination" because ECOA/Regulation B prohibits discrimination and requires action notices and valuation copies.
Why the Other Options Are Wrong
Option A: Use the changed-circumstance standard to decide the ECOA Adverse Action Notice issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
ECOA and Regulation B: 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 ECOA and Regulation B; 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 Federal Laws Questions
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A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
An operations lead is resolving ECOA Prohibited Discrimination Bases during a loan-team coaching session. Which action best fits the rule?
In a file escalation meeting, a disclosure specialist sees facts tied to TILA Closing Disclosure. What should the file reflect?
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