A company policy update raises a question about mortgage advertising compliance. Which action should the state compliance officer recommend?
Correct Answer
B) Use truthful advertising with required APR disclosures
Why this is correct: The core concept is that mortgage advertising is strictly regulated to prevent deception. Under Regulation Z (TILA), if an advertisement states specific credit terms (like a periodic payment amount), it becomes a "triggering term" that requires the clear and conspicuous disclosure of other terms, including the Annual Percentage Rate (APR). The correct action, "Use truthful advertising with required APR disclosures," directly addresses this by mandating both truthfulness and the inclusion of legally required disclosures when trigger terms are used. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower willingness does not excuse a violation of advertising laws. "Resolve the Fair Advertising Practices issue with the branch licensing exception that does not fit the facts" is wrong because applying an irrelevant exception does not correct the underlying compliance failure. "Document the issue later instead of correcting the compliance problem first" is wrong because compliance problems must be corrected immediately; documentation alone is insufficient. Exam tip: Remember the TILA/Reg Z advertising rule: Mention a specific payment, rate, or term? You must trigger the APR disclosure.
Why This Is the Correct Answer
The correct response is "Use truthful advertising with required APR disclosures" because Mortgage advertising must avoid misleading claims and satisfy APR/trigger-term rules.
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: Resolve the Fair Advertising Practices issue with the branch licensing exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
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
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