A policy analyst is resolving Good Faith and Fair Dealing during a quality-control sample. Which action best fits the rule?
Correct Answer
C) Avoid steering the borrower to increase compensation
Why this is correct: The duty of good faith and fair dealing prohibits steering, which is guiding a borrower to a loan to increase the originator's compensation. Avoiding steering is a core obligation to ensure the borrower receives a suitable loan based on their needs, not the originator's financial incentive. Why the other choices are wrong: "Treat borrower familiarity with mortgages as a waiver of required file steps" is wrong because a borrower's experience does not waive any regulatory requirements or the originator's duties. "Continue with incomplete facts because the loan appears likely to close" is wrong because proceeding without complete and accurate information violates due diligence and can lead to inaccurate disclosures. "Resolve the Good Faith and Fair Dealing issue with the loan estimate exception that does not fit the facts" is wrong because misapplying an exception is non-compliant and does not address the underlying fair dealing obligation. Exam tip: Good faith means acting honestly and putting the borrower's interests ahead of your own compensation. Steering is a direct violation of this principle.
Why This Is the Correct Answer
The correct response is "Avoid steering the borrower to increase compensation" because MLO obligations include fair dealing, no steering, accurate information, and compliant compensation.
Why the Other Options Are Wrong
Option A: Treat borrower familiarity with mortgages as a waiver of required file steps.
This choice is not the best answer because it applies the wrong file step for loan-originator obligations; the governing rule is tested by the correct option.
Option B: Continue with incomplete facts because the loan appears likely to close.
This choice is not the best answer because it applies the wrong file step for loan-originator obligations; the governing rule is tested by the correct option.
Option D: Resolve the Good Faith and Fair Dealing issue with the loan estimate exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
loan-originator obligations: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For loan-originator obligations questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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 Origination Questions
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An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
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Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
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