An originator presents a borrower with three options from one lender, all of which carry a prepayment penalty, and none without. The borrower qualifies for a version without one. What is missing from the presentation?
Correct Answer
A) Avoid risky features when the safe-harbor category requires it
Why this is correct: The Dodd-Frank anti-steering rule prohibits loan originators from steering a consumer to a loan that provides greater compensation to the originator but does not benefit the consumer. A key provision offers a "safe harbor" if the originator presents loan options from each of several defined categories, including a loan without risky features (like negative amortization or interest-only payments). The correct answer, "Avoid risky features when the safe-harbor category requires it," reflects the obligation to include and properly present this no-risky-features option to comply with the safe harbor and avoid illegal steering. Why the other choices are wrong: "Omit the no-risky-features option because it is less profitable" is wrong because intentionally omitting this option to increase profit is the definition of illegal steering. "Steer the borrower to an affiliate product without comparing available alternatives" is wrong because it violates the rule's core prohibition against steering to a lender's affiliate product without a proper comparison of other available loans. "Treat a rushed product choice as a waiver of anti-steering safeguards" is wrong because consumer haste or pressure does not waive the lender's legal obligation to comply with anti-steering rules. Exam tip: Remember the anti-steering safe harbor hinges on presenting loan options that include a loan without risky features. Any action that undermines this presentation is likely a violation.
Why This Is the Correct Answer
The correct response is "Avoid risky features when the safe-harbor category requires it" because Anti-steering rules restrict steering consumers to loans that increase compensation without being in the consumer interest.
Why the Other Options Are Wrong
Option B: Omit the no-risky-features option because it is less profitable.
This choice is a tempting shortcut, but it conflicts with anti-steering safeguards because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Steer the borrower to an affiliate product without comparing available alternatives.
This choice is a tempting shortcut, but it conflicts with anti-steering safeguards because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Treat a rushed product choice as a waiver of anti-steering safeguards.
This choice is not the best answer because it applies the wrong file step for anti-steering safeguards; the governing rule is tested by the correct option.
Memory Technique
anti-steering rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For anti-steering safeguards questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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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