In a pricing desk question, a quality-control reviewer sees facts tied to TILA Ability to Repay. What should the file reflect?
Correct Answer
B) Obtain updated documentation before relying on the fact
Why this is correct: The Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good faith determination based on verified and documented information. If a fact in the file is stale, unclear, or conflicting, the lender must obtain updated and reliable documentation before relying on it for the ATR decision. This ensures the file contains a solid, defensible record, as the original explanation emphasizes the need for reliable documentation. Why the other choices are wrong: "Treat unsigned disclosures as valid because the borrower saw them by email" is wrong because certain disclosures (like the Loan Estimate) have specific delivery and receipt requirements; an unsigned or unacknowledged copy may not prove proper delivery. "Clear the condition based on a verbal statement that is not documented" is wrong because ATR requires verification; a verbal statement alone is insufficient documentation. "Keep conflicting file dates because the loan otherwise meets pricing requirements" is wrong because conflicting dates create uncertainty about the timing of events (like application or disclosure), which can be a compliance violation; they must be resolved for an accurate file. Exam tip: For ATR, if it isn't documented, it didn't happen. Always secure written verification for key facts.
Why This Is the Correct Answer
The correct response is "Obtain updated documentation before relying on the fact" because Origination files need reliable documentation of income, assets, employment, debts, and changed facts.
Why the Other Options Are Wrong
Option A: Treat unsigned disclosures as valid because the borrower saw them by email.
This choice is not the best answer because it applies the wrong file step for loan-file documentation; the governing rule is tested by the correct option.
Option C: Clear the condition based on a verbal statement that is not documented.
This choice is a tempting shortcut, but it conflicts with loan-file documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Keep conflicting file dates because the loan otherwise meets pricing requirements.
This choice is not the best answer because it applies the wrong file step for loan-file documentation; the governing rule is tested by the correct option.
Memory Technique
TILA Ability to Repay: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For loan-file documentation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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 Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
A construction-to-permanent loan will convert to a substantially higher fully amortizing payment. Which payment is especially important when assessing the borrower's long-term repayment capacity?
A construction-to-permanent note states that conversion requires completion, a certificate of occupancy, and no unresolved liens. Construction is finished, but a mechanic's lien remains. What should happen?
A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
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