SAFE MLO State Regulation & Compliance question: Model State Law

SAFE MLOState Regulation & Compliance

Hours before a state examination, a branch manager shreds several loan files he fears contain errors. How does the Model State Law treat this?

A As allowed, because files may be destroyed after closing
B As a violation that obstructs the examination
C As a record-retention lapse, not an exam violation
D As a minor issue unless the files contained fraud

Show the answer and explanation

Answer: B. As a violation that obstructs the examination

The Model State Law prohibits any person subject to investigation or examination from knowingly withholding, abstracting, removing, mutilating, destroying or secreting any books, records, computer records or other information (CSBS/AARMR Model State Law, investigation and examination authority). Shredding files to avoid an exam is a violation that can support license sanctions. Source: CSBS/AARMR Model State Law for Uniform Licensing of Mortgage Loan Originators (as at 11 Oct 2026).

Common mistake

Treating record destruction as a business decision rather than obstruction.

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Original study material mapped to the public NMLS Content Outline; not a real test question.Not affiliated with or endorsed by NMLS, CSBS or SRR. Verify figures and rules against current guidance before relying on them.