A quality-control reviewer flags a case because a loan officer wants different terms because of a protected applicant characteristic. What correction is appropriate?
Correct Answer
D) Evaluate the file without prohibited-basis factors
Why this is correct: The core fair lending rule from Regulation B (the governing federal rule mandates that credit decisions cannot be influenced by prohibited-basis factors like race, sex, or age. A quality-control reviewer's role is to ensure compliance. When a file is flagged because a loan officer considered a protected characteristic, the appropriate correction is to re-evaluate the application using only permissible, objective financial criteria, thereby removing the discriminatory influence. Why the other choices are wrong: "Apply the rule only after a regulator asks specifically about financial responsibility" is wrong because compliance is required proactively, not just upon regulatory inquiry. "Treat the rule as waived because all parties want the file to move faster" is wrong; parties cannot waive federal fair lending laws. "Assume another jurisdiction approval automatically cures this file" is wrong because a violation of federal law is not cured by approval from a different authority. Exam tip: In quality control or correction scenarios, the fix is always to apply the correct rule immediately. "Evaluate the file without prohibited-basis factors" is the standard corrective action for fair lending issues.
Why This Is the Correct Answer
The correct response is "Evaluate the file without prohibited-basis factors". Credit decisions and treatment must not turn on prohibited-basis factors.
Why the Other Options Are Wrong
Option A: Apply the rule only after a regulator asks specifically about financial responsibility.
Apply the rule only after a regulator asks specifically about financial responsibility. is not correct because it bypasses the rule supported by the explanation.
Option B: Treat the rule as waived because all parties want the file to move faster.
Treat the rule as waived because all parties want the file to move faster. is not correct because it bypasses the rule supported by the explanation.
Option C: Assume another jurisdiction approval automatically cures this file.
Assume another jurisdiction approval automatically cures this file. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
Discouragement and different treatment can be fair-lending problems before denial.
Exam Tip
Discouragement and different treatment can be fair-lending problems before denial.
Common Mistakes to Avoid
- -Fair lending applies to every aspect of the credit transaction, not just final approval.
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At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
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