A processor handoff raises a Fair Housing Act question for an audit analyst. What answer should guide the file?
Correct Answer
B) Review the policy for unlawful disparate impact
Why this is correct: The Fair Housing Act (FHA) prohibits discrimination in housing-related transactions based on protected characteristics (race, color, religion, etc.). This includes policies that are neutral on their face but have a "disparate impact"—an unjustified discriminatory effect—on a protected class. The correct action, "Review the policy for unlawful disparate impact," is the essential first step in an audit to identify and correct potentially discriminatory practices, even if they were not intentionally biased. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal rules cannot circumvent federal anti-discrimination law. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because Fair Housing compliance is mandatory and ongoing, not something triggered only by an inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because fair lending analysis and defense rely on documented, objective criteria, not informal agreements. Exam tip: Remember that the FHA bans both intentional discrimination (disparate treatment) and policies with an unjustified discriminatory effect (disparate impact).
Why This Is the Correct Answer
The correct response is "Review the policy for unlawful disparate impact" because Mortgage terms and treatment cannot discriminate or redline on protected-class grounds.
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 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
Fair Housing Act compliance: 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 Housing Act compliance; 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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