A renewal checklist raises a question about scope and exemptions. Which action should the compliance manager recommend?
Correct Answer
C) Check escrow and appraisal duties for a covered HPML
Why this is correct: Higher-Priced Mortgage Loans (HPMLs) are defined under Regulation Z (TILA) by comparing the loan's APR to the Average Prime Offer Rate (APOR). If a loan is a covered HPML, it triggers additional requirements, such as escrow accounts for property taxes and insurance (with certain exceptions) and, for certain transactions, a special appraisal. Therefore, when a renewal checklist raises a scope question, the manager should recommend to "Check escrow and appraisal duties for a covered HPML." Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HPML escrow and appraisal rules are federal mandates with very limited exceptions. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the duties apply at origination and must be implemented proactively. "Rely on oral agreement when the rule requires documented compliance" is wrong because HPML requirements involve written disclosures and documented compliance steps. Exam tip: To determine if HPML rules apply, first calculate if the APR exceeds the APOR by the specified margin (e.g., 1.5% for first-lien, 2.5% for subordinate-lien). Then check for any applicable exemptions, like loans for new construction.
Why This Is the Correct Answer
The correct response is "Check escrow and appraisal duties for a covered HPML" because HPML coverage depends on APR-over-APOR thresholds and carries escrow or appraisal duties.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
HPML requirements: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to HPML requirements; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Federal Laws Questions
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
People Also Study
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam