A file secured by five acres with a farmhouse on it is set aside as "unimproved land". Someone points out that there is a dwelling on the parcel. How should the question be settled?
Correct Answer
D) Use Regulation C coverage rules before excluding the file
Why this is correct: As with the previous HMDA question, the correct first step is always to apply Regulation C's coverage rules. HMDA reporting is required only for covered institutions and covered loan applications. Before excluding a file from reporting, one must confirm it falls outside these defined coverage criteria. Why the other choices are wrong: "Use prior refinance benefit approval as a substitute for the current HMDA Reporting Requirements requirement" is wrong because a prior approval for a different purpose (like a refinance benefit) does not determine HMDA coverage; the Regulation C rules do. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA reporting is an annual obligation, not contingent on a regulator's inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA requires formal data collection and reporting processes, not informal oral agreements. Exam tip: HMDA questions often test the initial step: determine coverage using Regulation C. Don't skip to conclusions without checking coverage first.
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 prior refinance benefit approval as a substitute for the current HMDA Reporting Requirements requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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 C: 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
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
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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 disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
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