An originator assembles options for a borrower and every one of them includes negative amortisation, although the borrower qualifies for products without it. What is wrong with the set?
Correct Answer
A) Avoid risky features when the safe-harbor category requires it
Why this is correct: Anti-steering rules require the MLO to present loan options that are in the consumer's interest. A key safe harbor provision is offering a loan with no risky features (like negative amortization, interest-only payments, or a balloon payment). "Avoid risky features when the safe-harbor category requires it" aligns with offering compliant, lower-risk loans. Why the other choices are wrong: "Give a token list of options without a meaningful lower-rate or lower-cost alternative" violates the rule to present a real choice of loan options. "Omit the no-risky-features option because it is less profitable" is prohibited steering, as it places the originator's compensation above the consumer's interest. "Steer the borrower to an affiliate product without comparing available alternatives" is a classic example of illegal steering for the benefit of the affiliate. Exam tip: To avoid steering violations, ensure you present loans from different categories and include options that meet the safe harbor (e.g., a loan without risky features).
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 B: 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.
Option C: Omit the no-risky-features option because it is less profitable.
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 D: Steer the borrower to an affiliate product without comparing available alternatives.
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?
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?
A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A Fannie Mae borrower wants to use eligible vested retirement assets solely to meet reserves, not for the down payment or closing costs. After verifying account ownership, vesting, accessibility and the eligible amount, must the funds be withdrawn?
Next Question
A manager tells the team the safe harbour is met as long as three options are put in front of the borrower, whatever features those options carry. Is that right?