Before the loan advances, a branch supervisor must resolve a HOEPA high-cost mortgage rules issue in a training scenario. What should happen?
Correct Answer
B) Provide required counseling and disclosures when HOEPA applies
Why this is correct: The Home Ownership and Equity Protection Act (HOEPA) imposes special requirements for high-cost mortgages. These loans are identified by specific triggers: a high annual percentage rate (APR), high points and fees, or certain prepayment penalties. When a loan meets these HOEPA triggers, the law mandates specific actions before the loan can advance, including providing required counseling and disclosures to the borrower. This is the core compliance step to resolve the issue. Why the other choices are wrong: "Apply the SAFE Act testing timing rule even though the file is testing HOEPA Points and Fees" is wrong because the SAFE Act governs MLO licensing, not HOEPA's substantive loan requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance with HOEPA is mandatory and must be completed before loan consummation, not deferred. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA's counseling and disclosure requirements must be in writing and properly documented. Exam tip: Remember the three HOEPA triggers: rate, points-and-fees, and prepayment penalty. If any are met, mandatory counseling and written disclosures are required.
Why This Is the Correct Answer
The correct response is "Provide required counseling and disclosures when HOEPA applies" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
Why the Other Options Are Wrong
Option A: Apply the SAFE Act testing timing rule even though the file is testing HOEPA Points and Fees.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: 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
HOEPA high-cost mortgage rules: 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 HOEPA high-cost mortgage rules; 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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