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?
Correct Answer
D) Avoid risky features when the safe-harbor category requires it
Why this is correct: The Dodd-Frank Act's anti-steering provisions prohibit loan originators from steering a consumer to a loan that provides greater compensation to the originator unless the loan is in the consumer's interest. A key compliance mechanism is the "safe harbor," which requires that the originator present loan options from multiple creditors (or a range of options from one creditor) that include a loan with no risky features (like negative amortization, interest-only payments, or a balloon payment). Avoiding such risky features when the safe-harbor category requires it is a direct application of the rule. Why the other choices are wrong: "Steer the borrower to an affiliate product without comparing available alternatives" is wrong because this is the definition of prohibited steering; the rule requires a comparison of alternatives to ensure the loan is in the consumer's interest. "Treat a rushed product choice as a waiver of anti-steering safeguards" is wrong because consumers cannot waive these statutory protections; the originator's obligations are independent of the borrower's time pressure. "Limit the discussion to the product that is easiest for the branch to close" is wrong because this would be steering based on the originator's convenience, not the consumer's interest, and violates the requirement to present a range of options. Exam tip: Anti-steering is about compensation and consumer interest. The safe harbor requires presenting options, including one without risky features. 'Easiest to close' or 'affiliate product only' are classic wrong answers.
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 A: 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.
Option B: Treat a rushed product choice as a waiver of anti-steering safeguards.
This choice is not the best answer because it applies the wrong file step for anti-steering safeguards; the governing rule is tested by the correct option.
Option C: Limit the discussion to the product that is easiest for the branch to close.
This choice is not the best answer because it applies the wrong file step for anti-steering safeguards; the governing rule is tested by the correct option.
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?
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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?
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