A real estate agent who referred the borrower asks to be copied on the underwriting conditions so she can "keep the deal moving". The conditions list the borrower’s income and two account balances. What governs the request?
Correct Answer
D) Follow privacy limits before sharing nonpublic personal information
Why this is correct: The core principle is the protection of borrower nonpublic personal information under 12 CFR Part 1016 (Regulation P). This regulation mandates that financial institutions limit the sharing of such information and provide privacy notices. When an outside party requests bank statements without a permissible basis (like a valid business need or consumer consent), sharing the information would violate these privacy limits. Therefore, the correct action is to "Follow privacy limits before sharing nonpublic personal information." Why the other choices are wrong: The choice to "Continue the activity because the borrower appears willing to proceed" is wrong because a borrower's willingness does not override the legal requirement for a permissible basis under the privacy rule. The choice to "Ignore the consumer-protection issue unless the borrower complains" is wrong because the institution has an affirmative duty to protect information, regardless of complaints. The choice to "Treat the Handling personal information and privacy review as complete because the file contains a related loan estimate note" is wrong because a loan estimate is unrelated to privacy compliance; the review is not complete until privacy limits are followed. Exam tip: Privacy compliance is an independent duty. Do not assume other documents or borrower consent automatically satisfy the requirement for a permissible basis to share nonpublic information.
Why This Is the Correct Answer
The correct response is "Follow privacy limits before sharing nonpublic personal information" because Lines 273-277; 12 CFR Part 1016 summary and Subparts A-B.
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: 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: Treat the Handling personal information and privacy review as complete because the file contains a related loan estimate note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
borrower privacy and confidentiality: 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 borrower privacy and confidentiality; 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
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