An originator forwards a borrower’s two most recent pay stubs to a title company contact who asked for "whatever you have on the file". What is wrong with sending them?
Correct Answer
B) Follow privacy limits before sharing nonpublic personal information
Why this is correct: The quality-control finding highlights a potential violation of 12 CFR Part 1016 privacy rules. These rules prohibit sharing a borrower's nonpublic personal information (like bank statements) with outside parties without a permissible purpose. The appropriate correction is to ensure the privacy limits are followed, meaning the information is not shared unless a valid basis exists. Therefore, the correct correction is to "Follow privacy limits before sharing nonpublic personal information." Why the other choices are wrong: The choice to "Let production goals override the required verification, disclosure, license, or record step" is wrong because business goals never justify violating consumer protection laws like privacy rules. The choice to "Apply the rule only after a regulator asks specifically about records, reports, and required notices" is wrong because compliance must be proactive and integral to operations. The choice to "Treat the rule as waived because all parties want the file to move faster" is wrong because regulatory requirements cannot be waived by mutual agreement for speed. Exam tip: In a compliance review, the correction must always align with the underlying rule—here, the privacy rule. Speed and production pressure are never valid excuses.
Why This Is the Correct Answer
The correct response is "Follow privacy limits before sharing nonpublic personal information". Borrower nonpublic personal information is subject to privacy notices and sharing limits.
Why the Other Options Are Wrong
Option A: Let production goals override the required verification, disclosure, license, or record step.
Let production goals override the required verification, disclosure, license, or record step. is not correct because it bypasses the rule supported by the explanation.
Option C: Apply the rule only after a regulator asks specifically about records, reports, and required notices.
Apply the rule only after a regulator asks specifically about records, reports, and required notices. is not correct because it bypasses the rule supported by the explanation.
Option D: Treat the rule as waived because all parties want the file to move faster.
Treat the rule as waived because all parties want the file to move faster. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
Outside party plus borrower data means pause and verify authority.
Exam Tip
Outside party plus borrower data means pause and verify authority.
Common Mistakes to Avoid
- -Closing a loan does not remove privacy duties for borrower information.
More Ethics & Fraud Questions
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The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
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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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