In a closing-readiness check, an operations lead sees facts tied to Fair Housing Act. What should the file reflect?
Correct Answer
D) Review the policy for unlawful disparate impact
Why this is correct: The Fair Housing Act (FHA) prohibits discrimination in housing-related transactions based on protected characteristics (race, color, religion, sex, national origin, familial status, disability). Discrimination can be intentional (disparate treatment) or can result from a neutral policy that has a disproportionate adverse effect on a protected class (disparate impact). A closing-readiness check must ensure the loan file reflects compliance, which includes reviewing policies for potential unlawful disparate impact. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because the FHA is a federal civil rights law; internal policies cannot create exceptions to it. "Use the branch licensing standard to decide the Fair Housing Act issue before confirming the trigger facts" is wrong because state licensing standards do not override federal fair lending laws, and decisions must be based on confirmed facts. "Rely on oral agreement when the rule requires documented compliance" is wrong because fair lending compliance, such as documenting reasons for an adverse action, requires written records. Exam tip: The FHA covers both overt discrimination and policies that create a discriminatory effect, even if unintentional.
Why This Is the Correct Answer
The correct response is "Review the policy for unlawful disparate impact" because Mortgage terms and treatment cannot discriminate or redline on protected-class grounds.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Use the branch licensing standard to decide the Fair Housing Act issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Fair Housing Act 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 Fair Housing Act 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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