A compliance analyst compares the file facts with Points and Fees during a licensing team review. Which conclusion is accurate?
Correct Answer
A) Calculate points and fees under the applicable Regulation Z rule
Why this is correct: Points and fees are critical under Regulation Z (Truth in Lending) for determining loan costs, APR, and qualification as a Qualified Mortgage (QM) or High-Cost Mortgage (HOEPA). Calculating points and fees under the applicable Regulation Z rule ensures accurate disclosure and compliance with federal requirements, affecting borrower eligibility and lender liability. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because Regulation Z has specific formulas; substituting another rule leads to errors. "Assume the Points and Fees condition is met because the borrower satisfied the separate advertising disclosure requirement" is wrong because advertising compliance does not fulfill the points and fees calculation requirement. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because points and fees definitions differ by loan type (e.g., closed-end vs. open-end). Exam tip: Master Regulation Z's points and fees calculation; it's key for QM and HOEPA compliance.
Why This Is the Correct Answer
The correct response is "Calculate points and fees under the applicable Regulation Z rule" because Points and fees can affect APR, HOEPA, QM, and borrower cost calculations.
Why the Other Options Are Wrong
Option B: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option C: Assume the Points and Fees condition is met because the borrower satisfied the separate advertising disclosure requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
points and fee calculations: 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 points and fee calculations; 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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A subordinate-lien home equity loan closes at an APR of 9.4% when the average prime offer rate for a comparable transaction is 6.1%.