A borrower is shown the loan with the highest compensation to the originator and told the others "would not work for your file", with no comparison offered. What does the anti-steering requirement call for?
Correct Answer
B) Avoid risky features when the safe-harbor category requires it
Why this is correct: TILA's anti-steering rules are designed to prevent loan originators from directing consumers to a loan that is not in their interest in order to increase the originator's compensation. The rules create a "safe harbor" for recommending a loan. To qualify for this safe harbor, the recommended loan must not have risky features (like negative amortization or a balloon payment) if a comparable loan without those features is available. Therefore, "Avoid risky features when the safe-harbor category requires it" is a defensible action. Why the other choices are wrong: "Present only the option that pays higher originator compensation" is the definition of illegal steering. "Use compensation to decide which qualified loan option to recommend" is wrong because compensation cannot be the deciding factor; the consumer's interest must be paramount. "Give a token list of options without a meaningful lower-rate or lower-cost alternative" violates the rule that the consumer must be presented with loan options for each type of transaction they qualify for, including options with lower rates/costs. Exam tip: Anti-steering is about preventing compensation from driving the recommendation. The safe harbor is your guide: recommend a loan without risky features, with a competitive rate, and with reasonable costs.
Why This Is the Correct Answer
The correct response is "Avoid risky features when the safe-harbor category requires it" because Anti-steering rules restrict steering consumers to loans that increase compensation without being in the consumer interest.
Why the Other Options Are Wrong
Option A: Present only the option that pays higher originator compensation.
This choice is a tempting shortcut, but it conflicts with anti-steering safeguards because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Use compensation to decide which qualified loan option to recommend.
This choice is not the best answer because it applies the wrong file step for anti-steering safeguards; the governing rule is tested by the correct option.
Option D: Give a token list of options without a meaningful lower-rate or lower-cost alternative.
This choice is a tempting shortcut, but it conflicts with anti-steering safeguards because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
anti-steering rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For anti-steering safeguards questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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 Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
Between the Loan Estimate and closing, prepaid interest increases $180, homeowner insurance increases $95, transfer taxes increase $40, and a credit report fee for which the consumer could not shop increases $12. There is no valid revised estimate or other exception. Which increases violate TRID's zero-tolerance rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
A construction-to-permanent loan will convert to a substantially higher fully amortizing payment. Which payment is especially important when assessing the borrower's long-term repayment capacity?
A construction-to-permanent note states that conversion requires completion, a certificate of occupancy, and no unresolved liens. Construction is finished, but a mechanic's lien remains. What should happen?
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During a quarterly review, a manager suggests paying originators an extra $250 whenever a borrower accepts the lender’s higher-rate, no-closing-cost option instead of paying costs at the table. What is the correct response?