A processor notices the same three names appearing as gift donors across eleven unrelated files in a month. She is unsure whether that is her business. What is the correct step?
Correct Answer
D) Document the suspicious pattern for AML review
Why this is correct: The governing concept is the requirement to identify and report suspicious activity under Anti-Money Laundering (AML) rules and the Bank Secrecy Act. When fraud is suspected, the compliant step is to document the suspicious pattern and escalate it for formal review, which may lead to filing a Suspicious Activity Report (SAR). This process is mandatory and must not involve "tipping off" the subject. Why the other choices are wrong: "Assume the Fraud Prevention and Reporting condition is met because the borrower satisfied the separate refinance benefit requirement" is wrong because fraud detection is independent of whether a loan meets underwriting or benefit criteria. "Ignore the consumer-protection issue unless the borrower complains" is wrong because MLOs have an affirmative duty to detect and report fraud. "Document the issue later instead of correcting the compliance problem first" is wrong because in fraud scenarios, timely documentation and escalation are part of the corrective action. Exam tip: Your duty is to detect, document, and escalate suspicious activity. Never assume fraud reporting is unnecessary just because other loan requirements are met.
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: Assume the Fraud Prevention and Reporting condition is met because the borrower satisfied the separate refinance benefit requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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: 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
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 branch pays its originators 1.1% of the loan amount on every file, and an extra $400 whenever the loan closes with an escrow waiver. Escrow waivers at this branch are granted only on loans priced above par, and the originator decides whether to offer one. Under Regulation Z, which part of this compensation arrangement, if any, is prohibited?
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?
A borrower pays a mortgage broker $3,400 directly at closing. The lender also offers the same brokerage 1.5% of the loan amount as a lender-paid credit on the same file. Under Regulation Z's dual-compensation rule, may the brokerage accept both payments on this transaction?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
A residential mortgage lender files a suspicious activity report about a borrower on 8 April. On 15 April the borrower calls to ask why the file has stalled, and the branch manager wants to tell him a report was filed so he can explain himself. May the manager tell the borrower that a suspicious activity report was filed?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During intake, an ad shows an interest rate but omits the APR presentation. What is the best compliant response?
Next Question
A lender pays a duly appointed contract processor $340 per file for actual processing work at reasonable market value, with no referral payment. All separately applicable licensing requirements are satisfied. Under RESPA Section 8, how should the processing fee be treated?