A quality-control reviewer is resolving TILA Advertising Requirements during a quality-control sample. Which action best fits the rule?
Correct Answer
B) Use truthful advertising with required APR disclosures
Why this is correct: The Truth in Lending Act (TILA) and Regulation Z set strict rules for mortgage advertising. The core requirement is that advertisements must be truthful and not misleading. If an advertisement states specific credit terms (like a periodic payment amount), it becomes a "triggered ad" and must also disclose the Annual Percentage Rate (APR) and other key terms clearly and conspicuously. The correct action, "Use truthful advertising with required APR disclosures," directly addresses this TILA mandate. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because consumer willingness does not excuse a violation of advertising law. "Ignore the consumer-protection issue unless the borrower complains" is wrong because TILA violations are subject to regulatory enforcement regardless of a complaint. "Apply the reverse-mortgage occupancy timing rule even though the file is testing TILA Advertising Requirements" is wrong because it applies an irrelevant rule to the wrong compliance area. Exam tip: For TILA advertising questions, remember the two-part rule: 1) Ads must be truthful, and 2) If trigger terms are used, required disclosures (like APR) must be present.
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: 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 reverse-mortgage occupancy timing rule even though the file is testing TILA Advertising Requirements.
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
In a file escalation meeting, the supervisor sees facts tied to RESPA Kickbacks and Referrals. What should the file reflect?
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?
An applicant has verified monthly income of $5,000 and monthly obligations of $4,700 after the proposed mortgage payment. The applicant expects an undocumented raise next year. What should the MLO do?
A lender bases approval entirely on the home's high appraised value and does not verify the borrower's income or existing debts. What is the central compliance concern?
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?
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?
To obtain approval, an MLO changes a self-employed applicant's verified monthly income from $6,000 to $9,000 without supporting documentation. How should this conduct be characterized?
A homeowner is encouraged to refinance for the third time in 18 months. Each loan generates new points and fees, while the borrower's payment and rate do not improve. Which practice is most strongly indicated?
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