Before closing, the team discovers that a borrower asks whether the company will file a suspicious activity report. What is the safest compliant answer?
Correct Answer
D) Do not tell the borrower that a SAR may be filed
Why this is correct: The core rule is that SAR filings must remain confidential. Under 31 CFR 1029.320, a financial institution must not notify any person involved in a suspicious transaction that a report has been or may be filed. The safest answer is to avoid any disclosure. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because proceeding with a potentially suspicious transaction without assessing the need for a SAR violates anti-money laundering protocols. "Resolve the Suspicious activity and borrower information issue with the appraisal review exception that does not fit the facts" is wrong because an appraisal review exception is irrelevant to SAR confidentiality and does not resolve the issue. "Document the issue later instead of correcting the compliance problem first" is wrong because the compliance problem (the need for confidentiality) must be addressed immediately by not answering the borrower's question. Exam tip: If a borrower asks about a SAR, the only compliant response is silence or a non-committal answer that does not reveal filing status.
Why This Is the Correct Answer
The correct response is "Do not tell the borrower that a SAR may be filed" because Lines 255-260; 31 CFR 1029.320 and final rule discussion of reports of suspicious transactions.
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 B: Resolve the Suspicious activity and borrower information issue with the appraisal review 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 C: 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
SAR escalation and anti-tipping rules: 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 SAR escalation and anti-tipping rules; 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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