A borrower-facing employee is unsure what to do when marketing proposes a rate the company is not prepared to offer. What is the correct response?
Correct Answer
C) Advertise only credit terms actually available
Why this is correct: The governing rule is 12 CFR 1026.24(a) under Regulation Z. It requires that any specific advertised credit term be a term the creditor actually will offer. An employee facing this dilemma has a clear duty: to ensure marketing materials are truthful. Therefore, the correct response is to insist that advertising features only credit terms that are actually available. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because consumer willingness does not legalize a deceptive advertisement. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the prohibition against deceptive ads is a strict liability rule for the creditor. "Apply the correct general concept to the wrong servicing transfer stage rather than the Truth in mortgage advertising rule" is wrong because it misapplies a compliance concept; the issue here is squarely about advertising, not servicing transfers. Exam tip: For borrower-facing staff, the mantra is simple: if an ad mentions a specific rate, that rate must be real. This is a non-discretionary rule.
Why This Is the Correct Answer
The correct response is "Advertise only credit terms actually available" because Lines 261-265 and 273-277; 12 CFR 1026.24(a).
Why the Other Options Are Wrong
Option A: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option B: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Apply the correct general concept to the wrong servicing transfer stage rather than the Truth in mortgage advertising rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
mortgage advertising 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 mortgage advertising 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
More Ethics & Fraud Questions
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In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
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