During intake, marketing proposes a rate the company is not prepared to offer. What is the best compliant response?
Correct Answer
A) Advertise only credit terms actually available
Why this is correct: Regulation Z (Truth in Lending Act), specifically 12 CFR 1026.24(a), governs advertising for closed-end credit like mortgages. A fundamental rule is that if a specific credit term (like an interest rate) is advertised, the creditor must actually be prepared to offer that term. Advertising a rate that is not genuinely available is deceptive and violates this rule. Therefore, the compliant response is to ensure that only actually available terms are advertised. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because a borrower's willingness does not excuse a violation of advertising rules. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the lender has an affirmative duty to comply, regardless of complaints. "Document the issue later instead of correcting the compliance problem first" is wrong because the deceptive ad must be corrected immediately to prevent further harm. Exam tip: For advertising questions, remember the key principle: advertised terms must be real, bona fide offers the creditor will actually extend.
Why This Is the Correct Answer
The correct response is "Advertise only credit terms actually available" because Lines 261-265 and 273-277; 12 CFR 1026.24(a).
Why the Other Options Are Wrong
Option B: 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 C: 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
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