A mortgage file is paused during a risk-control review because of Fair Housing Act. Which answer should choose the most defensible file action?

Correct Answer

D) Remove the redlining or disparate-treatment practice

Why this is correct: The Fair Housing Act prohibits discrimination in housing-related transactions, including mortgage lending, based on protected characteristics such as race, color, religion, sex, national origin, familial status, or disability. Prohibited practices include redlining (denying services based on the demographics of a geographic area) and disparate treatment (treating applicants differently based on a protected class). The most defensible and required action is to "Remove the redlining or disparate-treatment practice" to ensure compliance. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because fair housing laws are fundamental civil rights statutes with no allowable internal exceptions. "Wait until a regulator asks for the file before applying the federal requirement" is wrong as it advocates for non-compliance until caught. "Rely on oral agreement when the rule requires documented compliance" is wrong because fair lending compliance must be demonstrated through objective, documented policies and procedures. Exam tip: In Fair Housing Act questions, any practice that explicitly or effectively treats applicants differently based on a protected class is illegal. Look for keywords like 'redlining,' 'steering,' or 'disparate treatment.'