A team member asks about HELOC Terms and Features in an investor-delivery review while trying to match the file facts to the correct rule. Which response should the file reviewer use?

Correct Answer

A) Use the principal-dwelling security interest to analyze rescission

Why this is correct: The original explanation notes that HELOCs are open-end plans secured by a dwelling with special rescission rules when secured by a principal dwelling. The correct action, "Use the principal-dwelling security interest to analyze rescission," is directly tied to this rule. Under TILA, a borrower has a three-day right to rescind a loan that creates a security interest in their principal dwelling, with specific exceptions. Determining if the HELOC is secured by the principal dwelling is the first step in applying the correct rescission analysis. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because applying, for example, a closed-end mortgage rule to a HELOC would be incorrect without verifying the product type. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because HELOCs have specific eligibility requirements (like LTV caps) that cannot be ignored. "Use prior closing disclosure approval as a substitute for the current HELOC Terms and Features requirement" is wrong because each HELOC transaction requires its own compliant disclosures; prior approval does not satisfy current requirements. Exam tip: For HELOCs, always check if the security interest is in a principal dwelling to trigger the correct rescission rights analysis.