A California MLO discovers that their employing mortgage company has been charging borrowers for services that were never provided. Under CRMLA, what is the MLO's primary obligation?
Correct Answer
C) Report the violation to the DFPI immediately
Under CRMLA, MLOs have a duty to report violations of mortgage lending laws to the DFPI. Charging for services not provided constitutes fraud and must be reported immediately.
Why This Is the Correct Answer
Report the violation to the DFPI immediately is correct. Under CRMLA, MLOs have a duty to report violations of mortgage lending laws to the DFPI. Charging for services not provided constitutes fraud and must be reported immediately. Under CRMLA, MLOs have a duty to report violations of mortgage lending laws to the DFPI. Charging for services not provided constitutes fraud and must be reported immediately.
Why the Other Options Are Wrong
Option A: Document the violations but take no further action
Documentation alone fails to meet the statutory duty to report. Passive observation of fraud while taking no action violates professional obligations under CRMLA.
Option B: Discuss the issue with company management first
Internal discussion delays necessary regulatory action and may allow continued consumer harm. CRMLA requires immediate external reporting, not internal resolution attempts.
Option D: Resign from the company to avoid liability
Resignation doesn't fulfill reporting obligations and abandons the duty to protect consumers. MLOs cannot escape responsibility through resignation alone.
Memory Technique
CA -> ca-crmla-lenders-servicers-bonds-net-worth-servicing
Exam Tip
CRMLA questions usually turn on lender versus servicer authority, branch authority, $250,000 net worth, surety bond coverage, servicing duties, DFPI oversight, and exemptions for regulated depository institutions.
Common Mistakes to Avoid
- -Using a national baseline answer when California has agency-specific DFPI or DRE requirements
- -Confusing CFL, CRMLA, covered-loan, usury, servicing, and DRE endorsement rules
- -Relying on legacy California state-exam or education assumptions instead of current NMLS source pages
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