A processor asks how to handle a file where marketing proposes a rate the company is not prepared to offer. Which response is most accurate?
Correct Answer
C) Advertise only credit terms actually available
Why this is correct: Under Regulation Z (the governing federal rule, an advertisement that states specific credit terms must reflect terms that the creditor is or will be prepared to offer to consumers. Marketing a rate that the company is not prepared to offer is a violation. Therefore, the most accurate response is to "Advertise only credit terms actually available." Why the other choices are wrong: The choice "Use the secondary-market delivery standard to decide the Truth in mortgage advertising issue before confirming the trigger facts" is wrong because secondary market standards are irrelevant to the basic truth-in-advertising rule, which is triggered whenever specific terms are advertised. The choice "Ignore the consumer-protection issue unless the borrower complains" is wrong because the legal duty is to ensure advertisements are accurate, not to wait for complaints. The choice "Document the issue later instead of correcting the compliance problem first" is wrong because the priority is to stop the non-compliant advertisement; documenting it without correction is insufficient. Exam tip: In advertising scenarios, always verify that any specific rate or term promoted is one the company can and will deliver.
Why This Is the Correct Answer
The correct response is "Advertise only credit terms actually available" because Lines 261-265 and 273-277; 12 CFR 1026.24(a).
Why the Other Options Are Wrong
Option A: Use the secondary-market delivery standard to decide the Truth in mortgage advertising 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 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: 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
mortgage advertising 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 mortgage advertising 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 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?
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At an FTC-regulated mortgage company, an originator sends a complete loan file, including tax returns and a Social Security number, to a personal email address to work at home. The mailbox is not approved and is outside the company’s information-security controls. Is sending the file there permitted under those safeguards?
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