An MLO is reviewing procedures for a case where the borrower pays the broker directly and the creditor also offers compensation. What is the proper handling?
Correct Answer
A) Decline creditor compensation for that transaction
Why this is correct: The governing rule is the dual-compensation restriction under Regulation Z (the governing federal rule When a mortgage loan originator receives compensation directly from the consumer (the borrower), they cannot also receive compensation from the creditor (lender) for that same transaction. This prevents the MLO from being paid twice for a single loan. The original explanation cites this specific restriction, making "Decline creditor compensation for that transaction" the only compliant action. Why the other choices are wrong: "Change MLO pay after the lock because the borrower chose discount points" is incorrect because adjusting compensation based on loan terms (like discount points) is prohibited; compensation cannot be tied to loan terms. "Delay the Dual compensation restriction step until a later fee tolerance review instead of acting now" is wrong because the dual-compensation rule applies immediately upon the borrower paying the broker; it cannot be postponed. "Tie the compensation plan to APR, rate, or other loan terms on covered transactions" is prohibited because Regulation Z explicitly bans linking MLO compensation to loan terms. Exam tip: Remember the key phrase: "direct consumer-paid compensation triggers the dual-compensation restriction." If the borrower pays you, you cannot also take lender pay for that loan.
Why This Is the Correct Answer
The correct response is "Decline creditor compensation for that transaction". Direct consumer-paid compensation triggers the dual-compensation restriction for that transaction.
Why the Other Options Are Wrong
Option B: Change MLO pay after the lock because the borrower chose discount points.
This choice is not the best answer because it applies the wrong file step for MLO compensation restrictions; the governing rule is tested by the correct option.
Option C: Delay the Dual compensation restriction step until a later fee tolerance review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Tie the compensation plan to APR, rate, or other loan terms on covered transactions.
This choice is not the best answer because it applies the wrong file step for MLO compensation restrictions; the governing rule is tested by the correct option.
Memory Technique
Consumer-paid originator means look for the no-other-compensation rule.
Exam Tip
For MLO compensation restrictions questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Disclosure alone does not make dual compensation permissible.
More Origination Questions
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