A customer-service escalation raises a TILA Advertising Requirements question for the loan team. What answer should guide the file?
Correct Answer
C) Use truthful advertising with required APR disclosures
Why this is correct: Truth in Lending Act (TILA) advertising rules require that key terms are disclosed truthfully. If specific trigger terms (like a payment amount) are advertised, the APR must also be disclosed. The compliant action is to ensure advertising is truthful and includes all required disclosures. Why the other choices are wrong: "Assume the TILA Advertising Requirements condition is met because the borrower satisfied the separate escrow analysis requirement" is wrong because escrow analysis is unrelated to advertising disclosure rules. "Ignore the consumer-protection issue unless the borrower complains" is wrong because TILA imposes affirmative disclosure duties regardless of complaints. "Document the issue later instead of correcting the compliance problem first" is wrong because non-compliant advertising must be corrected before it is used; documentation alone does not fix the violation. Exam tip: In advertising questions, look for answers that emphasize truthfulness and providing all legally mandated disclosures (like APR).
Why This Is the Correct Answer
The correct response is "Use truthful advertising with required APR disclosures" because Mortgage advertising must avoid misleading claims and satisfy APR/trigger-term rules.
Why the Other Options Are Wrong
Option A: Assume the TILA Advertising Requirements condition is met because the borrower satisfied the separate escrow analysis 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 D: 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
mortgage advertising 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 mortgage advertising 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
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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A creditor pays originators 1.1% of loan amount plus $400 for portfolio loans. Across a significant number of transactions, it retains only five-year balloon loans and sells its other loans. Originators can influence this classification by recommending the term. Which compensation component is prohibited?
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A borrower-facing employee is unsure what to do when an ad shows an interest rate but omits the APR presentation. What is the correct response?