In a document-cure review, the loan team sees facts tied to HMDA Data Collection. What should the file reflect?
Correct Answer
B) Use Regulation C coverage rules before excluding the file
Why this is correct: HMDA, via Regulation C, has specific coverage rules that determine whether an institution and a loan are subject to its data collection and reporting requirements. The correct procedural step is to first apply these coverage rules to the facts of the loan file. Only after confirming the loan is not covered by these rules can it be legitimately excluded from HMDA requirements. "Use Regulation C coverage rules before excluding the file" describes this mandatory analysis. 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 legal test for HMDA coverage. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the coverage determination must be made at the time of application or origination for compliance. "Use prior privacy notice approval as a substitute for the current HMDA Data Collection requirement" is wrong because privacy notices (under regulations like GLBA) are a completely separate legal requirement from HMDA data collection. Exam tip: For HMDA, the first step is always to check the coverage rules (institution and transaction tests). Exclusion is only valid after this check, not as a substitute for it.
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 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: Use prior privacy notice approval as a substitute for the current HMDA Data Collection requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
More Federal Laws Questions
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
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