A mortgage file is paused during a secondary-market screen because of ATR QM Rule Requirements. Which answer should match the file facts to the correct rule?
Correct Answer
B) Document income, debts, and simultaneous loans
Why this is correct: The Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules require a lender to make a reasonable, good faith determination of a consumer's ability to repay the loan before extending credit. This determination must be based on verified and documented financial information. Core elements for this assessment include the consumer's income, debts, and any simultaneous loans. Therefore, the rule-based response is to properly document these key financial factors to support the ATR determination and to see if the loan meets QM standards. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal policies cannot override the federal ATR/QM verification requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because ATR must be verified and documented at or before consummation. "Rely on oral agreement when the rule requires documented compliance" is wrong because ATR verification requires reliable third-party records, not just oral statements. Exam tip: ATR is about verifying repayment ability. Key documentation includes income (paystubs, W-2s), debts (credit report), and other loan obligations.
Why This Is the Correct Answer
The correct response is "Document income, debts, and simultaneous loans" because ATR/QM rules require verified repayment ability and restrict risky QM features.
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 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
ATR/QM repayment-ability 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 ATR/QM repayment-ability 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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