A mortgage file is paused during a risk-control review because of ECOA Fair Lending. Which answer should choose the most defensible file action?
Correct Answer
C) Review any neutral policy with discriminatory effect
Why this is correct: The governing concept is ECOA (Equal Credit Opportunity Act), which prohibits discrimination based on protected characteristics. Fair lending analysis includes reviewing policies for "disparate impact"—a neutral policy that has a discriminatory effect on a protected class. The most defensible action is to review such a policy to ensure it is justified by business necessity and less discriminatory alternatives are considered. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower willingness does not validate a potentially discriminatory policy. "Ignore the consumer-protection issue unless the borrower complains" is wrong because ECOA requires proactive fair lending reviews. "Use the government-loan eligibility standard to decide the ECOA Fair Lending issue before confirming the trigger facts" is wrong because applying an unrelated standard (e.g., FHA guidelines) without first analyzing the specific policy's effect is improper and may miss the ECOA violation. Exam tip: In fair lending, always scrutinize neutral policies for unintended discriminatory effects—this is "disparate impact."
Why This Is the Correct Answer
The correct response is "Review any neutral policy with discriminatory effect" because Fair lending requires equal treatment and credit-related standards without prohibited-basis discrimination.
Why the Other Options Are Wrong
Option A: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option B: 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: Use the government-loan eligibility standard to decide the ECOA Fair Lending issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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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