A mortgage team asks an operations lead about financial responsibility during a fair-lending controls review. Which answer should guide the file?
Correct Answer
A) Review any neutral policy with discriminatory effect
Why this is correct: The original explanation states that fair lending requires equal treatment without prohibited-basis discrimination. Under ECOA (Equal Credit Opportunity Act), disparate impact occurs when a neutral policy has a discriminatory effect on a protected class. A fair-lending controls review must examine any such policy for potential discriminatory impact, even if it appears neutral on its face. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed." is wrong because willingness does not override the duty to review policies for discriminatory effects. "Ignore the consumer-protection issue unless the borrower complains." is wrong because fair lending requires proactive review of policies, not reactive response to complaints. "Treat the ECOA Disparate Impact review as complete because the file contains a related closing disclosure note." is wrong because a closing disclosure note (under TRID) addresses different timing disclosures and does not fulfill the separate obligation to analyze policies for disparate impact under ECOA. Exam tip: In fair lending, always review neutral policies for discriminatory effect—this is the core of disparate impact analysis.
Why This Is the Correct Answer
The correct response is "Review any neutral policy with discriminatory effect" because Fair lending requires equal treatment and credit-related standards without prohibited-basis discrimination.
Why the Other Options Are Wrong
Option B: 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 C: 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 D: Treat the ECOA Disparate Impact review as complete because the file contains a related closing disclosure 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
fair-lending controls: 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 controls; 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?
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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?
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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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A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?