Ethics · 18% of the SAFE examhard
Correct answer: This potentially violates the anti-steering provisions of the LO Comp Rule if the borrower qualifies for Option 1, which has a lower rate and lower total cost
This scenario raises a serious anti-steering concern under Regulation Z's LO Compensation Rule (12 CFR 1026.36(e)). The anti-steering safe harbor requires that the loan terms offered must be the most favorable terms the borrower qualifies for, or one of a set of comparable options. Here, Option 1 has a lower rate (6.75% vs. 7.0%), and while lender fees are $2,000 higher, the rate difference on a $400,000 loan generates significant interest savings over time that likely outweigh the fee difference. The broker's recommendation of Option 2 — which yields $2,000 more in broker compensation — while ignoring the lower-rate option for the borrower is a textbook steering scenario. "This is permissible because lender-paid compensation..." is incorrect because while the LO Comp Rule prevents varying compensation by loan terms, it does not insulate a broker from anti-steering liability. "This only becomes a violation if the broker fails to..." improperly focuses only on upfront lender fees, ignoring total loan cost. "This potentially violates the anti-steering provisio..." is incorrect because written disclosure does not cure a steering violation.
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