During a new-license application, a policy analyst identifies an issue involving Fair Housing Act compliance. Which response is most compliant?
Correct Answer
C) Remove the redlining or disparate-treatment practice
Why this is correct: The Fair Housing Act prohibits discrimination in housing-related transactions, including mortgage lending, based on protected characteristics like race, color, religion, sex, national origin, familial status, or disability. "Redlining" (refusing to lend in certain areas based on demographics) and "disparate treatment" (treating applicants differently based on a protected class) are illegal practices. The only compliant response is to remove any such discriminatory practice. Why the other choices are wrong: Using an internal exception instead of the required federal disclosure or timing rule is wrong because fair housing laws are absolute prohibitions with no internal exceptions. Using the high-cost loan standard to decide the Fair Housing Act issue before confirming the trigger facts is wrong because high-cost loan rules (like HOEPA) are separate from Fair Housing Act discrimination analysis. Relying on oral agreement when the rule requires documented compliance is wrong because fair housing compliance requires documented, non-discriminatory policies and actions. Exam tip: Fair Housing Act violations are about discrimination in treatment or impact. The correct action is always to cease the discriminatory practice.
Why This Is the Correct Answer
The correct response is "Remove the redlining or disparate-treatment practice" because Mortgage terms and treatment cannot discriminate or redline on protected-class grounds.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Use the high-cost loan standard to decide the Fair Housing Act issue before confirming the trigger 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: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Fair Housing Act 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 Fair Housing Act 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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