A mortgage team asks a branch supervisor about TILA right of rescission during a record-retention audit. Which answer should guide the file?
Correct Answer
C) Give each consumer with an ownership interest rescission rights
Why this is correct: TILA's right of rescission applies to certain loans (like refinances) secured by the consumer's principal dwelling. The right must be provided to each consumer who has an ownership interest in that dwelling, even if they are not primarily liable on the note. This ensures all owners are informed of their right to cancel the transaction within three business days. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because rescission rights are a core TILA consumer protection that cannot be waived by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the right must be given at closing, not later. "Rely on oral agreement when the rule requires documented compliance" is wrong because the Notice of Right to Cancel must be provided in writing, in a specific format. Exam tip: For rescission, remember it's tied to the "principal dwelling" and all owners must get the notice, not just the borrowers on the loan.
Why This Is the Correct Answer
The correct response is "Give each consumer with an ownership interest rescission rights" because TILA rescission rights protect consumers with ownership interests in a principal dwelling.
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 B: 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
TILA right of rescission: 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 TILA right of rescission; 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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