Federal Mortgage LawsQuestion 58 of 400
A loan originator has two loan products available for a qualified borrower. Product A pays the originator a higher commission but carries a higher rate; Product B is cheaper for the borrower. The originator directs the borrower to Product A to earn more. This practice is best described as:
a.Prohibited steering
b.Permissible cross-selling
c.An affiliated business arrangement
d.A qualified mortgage
Explanation
Reg Z 1026.36's anti-steering provision prohibits directing a consumer to a loan based on the fact that it produces greater compensation for the originator, unless the loan is in the consumer's interest. Steering a borrower into a costlier product to increase pay violates the rule. This is unrelated to affiliated business or QM status.
Law Reference: Loan Originator Compensation Rule (Reg Z 1026.36)Practice all 400 questions free — no signup required.
Related questions on this topic
- Which of the following is a required 'pillar' of an anti-money laundering compliance program for a covered non-bank mortgage lender?
- Under the Loan Originator Compensation Rule, a loan originator's compensation may NOT be based on which of the following?
- A loan originator is paid a commission by the borrower directly on a transaction. On that same transaction, the originator also wants to collect a commission from the lender. What does the LO Compensation Rule say about this?
- Under Reg Z, which arrangement for changing a loan originator's compensation is generally permitted?
- The anti-steering safe harbor under Reg Z is satisfied when the loan originator presents the consumer with loan options that include the loan with the lowest interest rate, the loan with the lowest total dollar amount for origination points/fees, and:
- The Ability-to-Repay rule requires a creditor to make a reasonable, good-faith determination of the consumer's ability to repay. Which of the following is NOT one of the underwriting factors the rule requires the creditor to consider and verify?
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