An originator suspects a file involves layered funds from an undisclosed third party and wants to ask the borrower directly whether a report has been filed about him. What does the rule say about that conversation?
Correct Answer
B) Document the suspicious pattern for AML review
Why this is correct: The original explanation states that SAR rules require reporting or escalation of suspicious activity. For fraud prevention and reporting, the correct step is to document the suspicious pattern for review under Anti-Money Laundering (AML) protocols, which is the precursor to potential SAR filing. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed." is wrong because proceeding despite a suspicious pattern violates fraud prevention duties. "Ignore the consumer-protection issue unless the borrower complains." is wrong because fraud reporting is a regulatory obligation, not contingent on consumer complaints. "Apply the correct general concept to the wrong HMDA reporting stage rather than the Fraud Prevention and Reporting rule." is wrong because applying a concept from HMDA (a different reporting regime for demographic data) does not address the specific fraud detection and SAR reporting requirement. Exam tip: For fraud prevention, always document suspicious patterns for AML review—this is the required first step before potential SAR filing.
Why This Is the Correct Answer
The correct response is "Document the suspicious pattern for AML review" because SAR rules require reporting or escalation of suspicious activity and prohibit tipping off subjects.
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 C: 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: Apply the correct general concept to the wrong HMDA reporting stage rather than the Fraud Prevention and Reporting rule.
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?
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