In a closing-readiness check, a risk reviewer sees facts tied to TILA Truth in Advertising. What should the file reflect?
Correct Answer
B) Separate discount points from ordinary fees when the rule requires it
Why this is correct: TILA's advertising rules require that advertised terms, including rates and costs, be accurate and transparent. Separating discount points (prepaid interest) from other fees is a critical step for accurate APR calculation and fee disclosure. If an advertisement references a rate or payment, the underlying cost structure must be correctly categorized to ensure the ad is not misleading. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is arbitrary and non-compliant. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because advertising must reflect actual, available loan terms, not borrower preferences. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because fee treatment and advertising disclosures can vary by loan type. Exam tip: For TILA advertising, ensure all cost components, like discount points, are properly classified so advertised rates and payments are truthful.
Why This Is the Correct Answer
The correct response is "Separate discount points from ordinary fees when the rule requires it" because Points and fees can affect APR, HOEPA, QM, and borrower cost calculations.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
points and fee calculations: 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 points and fee calculations; 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
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