A compliance review finds that the borrower pays the broker directly and the creditor also offers compensation. What should the MLO do next?
Correct Answer
B) Decline creditor compensation for that transaction
Why this is correct: Under 12 CFR 1026.36(d)(2)(i), a mortgage broker (and its MLOs) cannot receive compensation from both the consumer and the creditor for the same transaction. The fact pattern triggers this dual-compensation restriction. The only compliant next step is to decline the creditor's compensation offer. Why the other choices are wrong: "Let the borrower and creditor both pay the MLO on the same transaction" is a direct description of the prohibited dual compensation. "Use profitability of the selected product to decide the originator bonus" violates rules prohibiting compensation based on loan terms or transaction profitability. "Change MLO pay after the lock because the borrower chose discount points" is wrong because compensation cannot be adjusted based on specific loan terms chosen by the borrower. Exam tip: In a review scenario, the corrective action is always to eliminate the dual source of pay. You cannot 'fix' it by adjusting amounts or timing.
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: Let the borrower and creditor both pay the MLO on the same transaction.
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 C: Use profitability of the selected product to decide the originator bonus.
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 D: 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.
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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