A branch manager asks about a loan file because a borrower asks whether the company will file a suspicious activity report. What should happen?
Correct Answer
C) Do not tell the borrower that a SAR may be filed
Why this is correct: The governing concept is the confidentiality requirement for Suspicious Activity Reports (SARs) under the governing federal rule The rule prohibits tipping off the subject of a SAR. Therefore, the correct action is to not disclose any information about a potential or actual SAR filing to the borrower. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because willingness does not override the legal duty to report suspicious activity and maintain confidentiality. "Ignore the consumer-protection issue unless the borrower complains" is wrong because a SAR is a regulatory, anti-money laundering requirement, not a consumer complaint issue. "Use prior PMI cancellation approval as a substitute for the current Suspicious activity and borrower information requirement" is wrong because PMI cancellation is unrelated to SAR filing obligations; they are distinct compliance areas. Exam tip: SAR confidentiality is absolute. Never confirm, deny, or hint at a SAR filing to the subject or any unauthorized party.
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: 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 prior PMI cancellation approval as a substitute for the current Suspicious activity and borrower information requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
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?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During a training quiz scenario, a processor encounters a TCPA Compliance issue. Which response should resolve the issue before the file moves forward?
Next Question
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?