During a borrower intake review, a closing coordinator encounters a Documentation Fraud Detection issue. Which response should explain the required action to the team?

Correct Answer

B) Verify the discrepancy with independent documentation

Why this is correct: The correct action when a Documentation Fraud Detection issue is encountered is to "Verify the discrepancy with independent documentation." This is the foundational principle for handling suspected fraud or discrepancies. The original explanation states that such issues "must be verified and escalated." Verification is the critical first step; it involves checking the questionable information against a separate, reliable source (e.g., a direct IRS transcript, a bank statement from the institution) to confirm or refute the suspicion before any further action is taken. This process is required to ensure loan integrity and comply with fraud prevention protocols. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because willingness to proceed does not resolve a potential fraud issue. Proceeding without verification could lead to originating a fraudulent loan, violating federal law and ethical duties. "Use the ability-to-repay standard to decide the Documentation Fraud Detection issue before confirming the trigger facts" is wrong because the ability-to-repay (ATR) assessment is a separate underwriting requirement. A suspected documentation fraud issue must be investigated and resolved on its own merits first; ATR cannot be properly assessed if the underlying data is unverified and potentially false. "Document the issue later instead of correcting the compliance problem first" is wrong because it inverts the proper order. The compliance problem (the potential fraud) must be addressed immediately. Documentation is part of the process, but correction and verification are the primary required actions; delaying correction to document later is a failure to act. Exam tip: Remember the fraud response sequence: Detect, Verify, Escalate. Never proceed, underwrite, or document over a red flag without first attempting to verify it independently.