A consumer obtains an application directly in person from a creditor for a 30-year ARM secured by the consumer's principal dwelling. No non-refundable fee has yet been paid. When are the CHARM booklet (or a suitable substitute) and the applicable ARM program disclosure due?
Correct Answer
D) When the application form is provided
D. Provide the materials when the application form is provided. The covered ARM rule uses the earlier of providing the form or payment of a non-refundable fee. No fee has been paid, so the direct in-person form delivery is the operative event. Scope and exceptions: The rule concerns covered variable-rate credit secured by the principal dwelling with a term exceeding one year. Telephone and intermediary applications have a specified three-business-day delivery-or-mailing exception. These materials do not replace other required loan disclosures. Source: Section 1026.19(b)(1)–(2) and introductory timing provision — https://www.consumerfinance.gov/rules-policy/regulations/1026/19/
Why This Is the Correct Answer
D. Provide the materials when the application form is provided. The covered ARM rule uses the earlier of providing the form or payment of a non-refundable fee. No fee has been paid, so the direct in-person form delivery is the operative event. Scope and exceptions: The rule concerns covered variable-rate credit secured by the principal dwelling with a term exceeding one year. Telephone and intermediary applications have a specified three-business-day delivery-or-mailing exception. These materials do not replace other required loan disclosures.
Why the Other Options Are Wrong
Option A: Within three business days after every direct in-person application
It incorrectly extends the telephone/intermediary timing exception to every in-person application.
Option B: At least three business days before consummation
It substitutes a later closing-related deadline for this early ARM disclosure.
Option C: Only when the introductory fixed-rate period ends
The borrower needs this information before choosing the loan, not at the first adjustment.
Exam Tip
Match each disclosure to its own triggering event rather than assuming one universal three-day rule.
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