The loan team compares the file facts with Fair Housing Act during an underwriting condition review. Which conclusion is accurate?
Correct Answer
C) Remove the redlining or disparate-treatment practice
Why this is correct: The Fair Housing Act (FHA) prohibits discrimination in housing-related transactions based on race, color, religion, sex, national origin, familial status, or disability. "Redlining" (refusing to lend in certain areas based on protected characteristics) and "disparate treatment" (treating applicants differently based on a protected class) are illegal practices under the Act. Therefore, the compliant action is to "Remove the redlining or disparate-treatment practice." Why the other choices are wrong: "Delay the Fair Housing Act step until a later anti-steering review instead of acting now" is wrong because Fair Housing compliance is an ongoing obligation; delaying corrective action on a discriminatory practice is non-compliant. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the FHA's prohibitions are always in effect; waiting for a regulator to find a violation does not fulfill the legal duty to comply. "Rely on oral agreement when the rule requires documented compliance" is wrong because while the FHA itself may not specify documentation for every action, fair lending examinations rely on documented policies and consistent treatment to prove non-discrimination; oral agreements provide no reliable evidence of compliance. Exam tip: The FHA bans discrimination in terms, conditions, and availability of housing finance. If you see a practice that treats protected classes differently or excludes geographic areas based on demographics, it's a violation that must be stopped.
Why This Is the Correct Answer
The correct response is "Remove the redlining or disparate-treatment practice" because Mortgage terms and treatment cannot discriminate or redline on protected-class grounds.
Why the Other Options Are Wrong
Option A: Delay the Fair Housing Act step until a later anti-steering 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 B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Fair Housing Act 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 Fair Housing Act 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
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