In a mortgage origination file, the person preparing the valuation would be paid more if the value is higher. Which action should be taken?
Correct Answer
D) Remove the value-based compensation conflict
Why this is correct: The core principle from 12 CFR 1026.42(d) is that a conflict of interest exists when an appraiser's pay depends on the property value. This conflict must be resolved before the valuation is relied upon for the loan. The only compliant action listed is to remove the value-based compensation conflict. Why the other choices are wrong: Asking the appraiser to ignore a condition issue so the loan can meet timing is prohibited coercion. Routing reconsideration requests through sales staff instead of the allowed valuation process is an improper attempt to influence value. Using production pressure to influence the appraiser delivery date or conclusion is also prohibited coercion under appraisal independence rules. Exam tip: All other options involve prohibited coercion or influence. The correct action is always to fix the compensation conflict.
Why This Is the Correct Answer
The correct response is "Remove the value-based compensation conflict". Valuation compensation cannot depend on the value assigned, and conflicts must be addressed before reliance.
Why the Other Options Are Wrong
Option A: Ask the appraiser to ignore a condition issue so the loan can meet timing.
This choice is a tempting shortcut, but it conflicts with appraisal and valuation independence because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option B: Route reconsideration requests through sales staff instead of the allowed valuation process.
This choice is a tempting shortcut, but it conflicts with appraisal and valuation independence because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Use production pressure to influence the appraiser delivery date or conclusion.
This choice is not the best answer because it applies the wrong file step for appraisal and valuation independence; the governing rule is tested by the correct option.
Memory Technique
Appraiser pay tied to value is not acceptable.
Exam Tip
For appraisal and valuation independence questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Borrower consent does not cure a valuation independence conflict.
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