Two applicants are identical on paper except that one is married and one is not, and the single applicant is asked for an extra six months of reserves. What does Regulation B require?
Correct Answer
B) Evaluate the file without prohibited-basis factors
Why this is correct: The rule from Regulation B (the governing federal rule prohibits using protected characteristics in any aspect of a credit transaction. In a training scenario, the correct action models strict adherence to this principle. "Evaluate the file without prohibited-basis factors" instructs the loan officer to disregard the illegal factor and base the decision solely on permissible financial criteria, which is the only compliant path. Why the other choices are wrong: The choice "Continue the activity because the borrower appears willing to proceed" is wrong as borrower consent cannot legitimize discrimination. The choice "Ignore the consumer-protection issue unless the borrower complains" is wrong because fair lending requires proactive compliance, not reactive response to complaints. The choice "Treat the Fairness in lending and prohibited basis review as complete because the file contains a related privacy notice note" is wrong because a privacy notice (like a GLBA notice) is unrelated to anti-discrimination compliance; its presence does not satisfy the fair lending requirement. Exam tip: Different compliance areas (like privacy and fair lending) have distinct rules. Do not assume one notice or action covers another.
Why This Is the Correct Answer
The correct response is "Evaluate the file without prohibited-basis factors" because Lines 250-254; 12 CFR 1002.4(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 C: 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: Treat the Fairness in lending and prohibited basis review as complete because the file contains a related privacy notice note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
fair-lending controls: 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-lending controls; 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
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During a disclosure desk review, the MLO encounters a SAR Filing Requirements issue. Which response should avoid a shortcut that would misapply the rule?
Next Question
A company policy update raises a question about mortgage advertising compliance. Which action should the state compliance officer recommend?