In a training scenario, an MLO refers a borrower to an affiliated title agency. What action best follows the rule?
Correct Answer
D) Give the AFBA disclosure and avoid required use
Why this is correct: The rule for Affiliated Business Arrangements (the governing federal rule is clear: the relationship must be disclosed to the borrower, and the borrower cannot be required to use the affiliated service. This applies regardless of the borrower's apparent willingness. Therefore, the best action is to "Give the AFBA disclosure and avoid required use." Why the other choices are wrong: The choice "Continue the activity because the borrower appears willing to proceed" is wrong because the borrower's willingness does not eliminate the legal duty to disclose the affiliation and avoid coercion. The choice "Delay the Affiliated business arrangement ethics step until a later changed-circumstance review instead of acting now" is wrong because the disclosure must be provided early enough for the borrower to make an informed choice; delaying is non-compliant. The choice "Document the issue later instead of correcting the compliance problem first" is wrong because documenting a violation does not correct it; the disclosure must be given immediately. Exam tip: In training scenarios, the correct action is always to follow the rule precisely. Borrower willingness is never a substitute for required disclosures.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use" because Lines 250-254; 12 CFR 1024.15(b).
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: Delay the Affiliated business arrangement ethics step until a later changed-circumstance review instead of acting now.
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
conflicts of interest: 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 conflicts of interest; 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
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A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
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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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