An analyst drops an application from the register because the borrower withdrew it two days before the decision. She says an incomplete file is not a reportable outcome. What should she do before excluding it?
Correct Answer
D) Use Regulation C coverage rules before excluding the file
Why this is correct: The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, has specific coverage rules that determine which institutions and which loan applications must be reported. Before deciding a file is excluded from HMDA reporting, a reviewer must first confirm whether the institution and the loan type are covered under these rules. "Use Regulation C coverage rules before excluding the file" is the proper, methodical approach to avoid misapplication. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HMDA's reporting requirements are federal law; internal exceptions cannot override them. "Use the licensing standard to decide the HMDA Fair Lending Analysis issue before confirming the trigger facts" is wrong because HMDA coverage is based on Regulation C criteria (e.g., institution type, loan purpose, dwelling type), not on state licensing standards. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA compliance requires collecting and reporting specific, documented data; oral agreements do not satisfy this. Exam tip: For HMDA questions, remember that the first step is always to check Regulation C coverage. The rule is fact-specific, so never assume a file is excluded without verifying the coverage triggers.
Why This Is the Correct Answer
The correct response is "Use Regulation C coverage rules before excluding the file" because Covered institutions collect and report HMDA data for covered mortgage applications and loans.
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: Use the licensing standard to decide the HMDA Fair Lending Analysis issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: 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
HMDA reporting: 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 HMDA reporting; 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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