A compliance exception review raises an ECOA Prohibited Basis question for a policy analyst. What answer should guide the file?
Correct Answer
C) Use consistent, credit-related underwriting standards
Why this is correct: The Equal Credit Opportunity Act (ECOA) and Regulation B prohibit discrimination on prohibited bases (e.g., race, religion, national origin, sex). A core requirement is that credit decisions must be based on consistent, objective, and credit-related standards. The correct answer, "Use consistent, credit-related underwriting standards," directly addresses this fundamental anti-discrimination principle. It ensures all applicants are evaluated fairly based on their financial capacity and creditworthiness. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because ECOA mandates specific disclosures and timelines; internal policies cannot override federal law. "Treat the ECOA Prohibited Basis review as complete because the file contains a related escrow analysis note" is wrong because a note about escrow does not demonstrate a proper, documented review for prohibited basis discrimination. "Rely on oral agreement when the rule requires documented compliance" is wrong because ECOA/Reg B often requires written notices and documentation; oral agreements are insufficient. Exam tip: When you see "ECOA Prohibited Basis," think "fair and consistent lending." The correct answer will always promote objective, uniform standards.
Why This Is the Correct Answer
The correct response is "Use consistent, credit-related underwriting standards" because ECOA/Regulation B prohibits discrimination and requires action notices and valuation copies.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Treat the ECOA Prohibited Basis review as complete because the file contains a related escrow analysis note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
ECOA and Regulation B: 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 ECOA and Regulation B; 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 Federal Laws Questions
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Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
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An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
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