A compliance review finds that a borrower asks whether the company will file a suspicious activity report. What should the MLO do next?
Correct Answer
D) Do not tell the borrower that a SAR may be filed
Why this is correct: The rule under 31 CFR 1029.320 mandates strict confidentiality regarding Suspicious Activity Reports (SARs). When a borrower asks if a SAR will be filed, the MLO must not disclose any information that could tip off the borrower. This is a fundamental requirement to prevent interference with law enforcement investigations. Thus, the next step is clear: "Do not tell the borrower that a SAR may be filed." Why the other choices are wrong: The choice to "Continue the activity because the borrower appears willing to proceed" is wrong because willingness does not negate the duty to maintain SAR confidentiality. The choice to "Use the reverse-mortgage occupancy standard to decide the Suspicious activity and borrower information issue before confirming the trigger facts" is wrong because it applies an irrelevant standard (occupancy) to a SAR confidentiality issue; the rule is clear and requires no such intermediate step. The choice to "Document the issue later instead of correcting the compliance problem first" is wrong because the immediate compliance problem—the risk of an improper disclosure—must be corrected by not answering the question. Exam tip: SAR confidentiality is a standalone rule. Do not conflate it with unrelated underwriting or occupancy standards. The only correct action is non-disclosure.
Why This Is the Correct Answer
The correct response is "Do not tell the borrower that a SAR may be filed" because Lines 255-260; 31 CFR 1029.320 and final rule discussion of reports of suspicious transactions.
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: Use the reverse-mortgage occupancy standard to decide the Suspicious activity and borrower information 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.
Option C: 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
SAR escalation and anti-tipping rules: 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 SAR escalation and anti-tipping rules; 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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Previous Question
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
Next Question
A borrower makes three deposits of $9,400 across two weeks, each just under the reporting threshold, and asks the originator not to "make this complicated". What should the originator do with what he has seen?