Before the team acts on a supervisory file review, a disclosure specialist must address Gramm Leach Bliley Privacy Requirements. Which response is most defensible?
Correct Answer
D) Follow privacy permissions before disclosure
Why this is correct: The Gramm-Leach-Bliley Act (GLBA) mandates that a financial institution may not disclose a consumer's nonpublic personal information to nonaffiliated third parties without providing a privacy notice and an opportunity to opt out, unless an exception applies. The core requirement is to protect confidentiality by sharing information only as permitted. Thus, the most defensible response is to "Follow privacy permissions before disclosure." Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because GLBA has specific opt-out requirements; mere willingness may not satisfy the legal standard. "Ignore the consumer-protection issue unless the borrower complains" is wrong because GLBA imposes affirmative duties on the institution, not duties triggered by complaints. "Use the privacy notice standard to decide the Gramm Leach Bliley Privacy Requirements issue before confirming the trigger facts" is wrong because it puts the procedural step (using a standard) before the necessary factual step of confirming what permissions are in place. Exam tip: GLBA privacy is about permission. Before any disclosure, you must know what the privacy notice allows and if the consumer has opted out.
Why This Is the Correct Answer
The correct response is "Follow privacy permissions before disclosure" because Borrower information must be protected and shared only with authority.
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 C: Use the privacy notice standard to decide the Gramm Leach Bliley Privacy Requirements 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.
Memory Technique
borrower privacy and confidentiality: 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 borrower privacy and confidentiality; 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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