A processor asks how to handle a file where the borrower pays the broker directly and the creditor also offers compensation. Which response is most accurate?
Correct Answer
C) Decline creditor compensation for that transaction
Why this is correct: The core compliance concept is the dual-compensation prohibition in 12 CFR 1026.36(d)(2)(i). Once a borrower pays the broker directly, the broker's company (including its MLOs) is barred from receiving any compensation from the creditor for that specific loan. The accurate procedural response is to decline the creditor's payment. Why the other choices are wrong: "Change MLO pay after the lock because the borrower chose discount points" is prohibited because compensation cannot vary based on specific loan terms chosen by the consumer. "Offset a pricing exception by reducing only this originator compensation" is wrong; compensation adjustments cannot be used to offset pricing concessions or exceptions for that specific transaction. "Tie the compensation plan to APR, rate, or other loan terms on covered transactions" describes a compensation structure that is explicitly prohibited. Exam tip: For processor questions, focus on the procedural action: decline the creditor pay. Do not look for ways to adjust or re-calculate the originator's pay.
Why This Is the Correct Answer
The correct response is "Decline creditor compensation for that transaction" because Lines 100 and 268-269; 12 CFR 1026.36(d)(2)(i).
Why the Other Options Are Wrong
Option A: Change MLO pay after the lock because the borrower chose discount points.
This choice is not the best answer because it applies the wrong file step for MLO compensation restrictions; the governing rule is tested by the correct option.
Option B: Offset a pricing exception by reducing only this originator compensation.
This choice is a tempting shortcut, but it conflicts with MLO compensation restrictions because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Tie the compensation plan to APR, rate, or other loan terms on covered transactions.
This choice is not the best answer because it applies the wrong file step for MLO compensation restrictions; the governing rule is tested by the correct option.
Memory Technique
MLO compensation restrictions: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For MLO compensation restrictions 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
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