During an MLO sponsorship update, a compliance manager identifies an issue involving ECOA and Regulation B. Which response is most compliant?
Correct Answer
A) Evaluate credit without prohibited-basis discrimination
Why this is correct: The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination in any aspect of a credit transaction based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or exercising rights under consumer credit laws. Evaluating credit without prohibited-basis discrimination is the fundamental, affirmative requirement for compliance. Why the other choices are wrong: "Use prior document-retention approval as a substitute for the current ECOA Adverse Action Notices requirement" is wrong because document-retention is a separate procedural rule; it cannot substitute for the substantive requirement to provide an adverse action notice when credit is denied. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because ECOA compliance is required at the time of the credit decision, not deferred until a regulatory inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because ECOA adverse action notices, for example, must be provided in writing; oral communication does not fulfill this documented requirement. Exam tip: ECOA's core principle is nondiscrimination. Always choose the option that actively prevents discrimination based on a prohibited basis.
Why This Is the Correct Answer
The correct response is "Evaluate credit without prohibited-basis discrimination" because ECOA/Regulation B prohibits discrimination and requires action notices and valuation copies.
Why the Other Options Are Wrong
Option B: Use prior document-retention approval as a substitute for the current ECOA Adverse Action Notices requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
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
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