A branch uses one loan-limit figure for the whole state and has done for two years. An auditor asks whether a single figure can be right across every county in it.

Correct Answer

C) Check high-cost-area limits before classifying the loan

Why this is correct: The governing concept is that the Federal Housing Finance Agency (FHFA) sets annual conforming loan limits, which are the maximum loan amounts Fannie Mae and Freddie Mac can purchase. These limits are higher in designated high-cost areas. Therefore, before definitively classifying a loan as conforming or non-conforming (jumbo), you must check if the property is in a high-cost area and apply the correct, higher limit if applicable. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because applying rules blindly without verifying property location and loan amount against the correct limit is a compliance failure. "Apply the correct general concept to the wrong changed-circumstance stage rather than the Conforming Loan Limits rule" is wrong because changed-circumstance rules relate to disclosures, not to the static determination of loan limits based on property location. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because conforming limits apply specifically to loans intended for GSE sale; other products like FHA or VA have their own, different limits. Exam tip: When you see "conforming loan limits," your first mental step should be: 1) Get the base limit for the year, and 2) Immediately check if the property is in a high-cost area for a possible higher limit.