The MLO is resolving ECOA Disparate Impact during a quality-control sample. Which action best fits the rule?
Correct Answer
D) Investigate and correct the disparate-impact pattern
Why this is correct: A disparate-impact concern requires analysis of the neutral policy or practice producing the adverse effect, followed by appropriate remediation when the pattern is not justified by a legitimate, necessary objective or a less discriminatory alternative is available. Why the other choices are wrong: Borrower willingness, an unrelated flood note, and delayed documentation do not cure a fair-lending problem. Exam tip: Keep disparate impact distinct from intentional disparate treatment, but investigate and remediate either type of ECOA risk.
Why This Is the Correct Answer
The correct response is "Investigate and correct the disparate treatment pattern" because Fair-lending review looks for discriminatory treatment, disparate impact, and redlining risks.
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 B: Treat the ECOA Disparate Impact review as complete because the file contains a related flood insurance note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
fair-lending enforcement risk: 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 fair-lending enforcement risk; 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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Previous Question
A file closes on a $290,000 house at an address that turns out to be a vacant lot, with a fabricated borrower and appraiser. What type of mortgage-fraud scheme fabricates the borrower and property underlying the loan?
Next Question
A quality-control reviewer flags a case because marketing proposes a rate the company is not prepared to offer. What correction is appropriate?