A borrower-facing employee is unsure what to do when a loan officer wants different terms because of a protected applicant characteristic. What is the correct response?
Correct Answer
A) Evaluate the file without prohibited-basis factors
Why this is correct: For any employee involved in the loan process, the correct response to a loan officer considering a protected characteristic is mandated by Regulation B (the governing federal rule The file must be assessed on financial merits alone. Therefore, "Evaluate the file without prohibited-basis factors" is the unequivocally correct instruction, ensuring compliance with fair lending laws. Why the other choices are wrong: The choice "Resolve the Fairness in lending and prohibited basis issue with the asset documentation exception that does not fit the facts" is wrong because invoking an irrelevant exception (like one for asset documentation) does not correct the fundamental violation of considering a prohibited factor. The choice "Ignore the consumer-protection issue unless the borrower complains" is wrong because the duty to comply is independent of borrower complaints. The choice "Document the issue later instead of correcting the compliance problem first" is wrong because the priority is to stop the violation and re-evaluate correctly; documentation is a secondary step. Exam tip: When faced with a fair lending violation, the first step is always to remove the prohibited factor from consideration. Correct the process, then document.
Why This Is the Correct Answer
The correct response is "Evaluate the file without prohibited-basis factors" because Lines 250-254; 12 CFR 1002.4(a).
Why the Other Options Are Wrong
Option B: Resolve the Fairness in lending and prohibited basis issue with the asset documentation exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
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
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