A mortgage team asks a sponsorship reviewer about HOEPA high-cost mortgage rules during a state-law refresher. Which answer should guide the file?
Correct Answer
B) Apply high-cost mortgage restrictions before consummation
Why this is correct: The original explanation states that HOEPA/high-cost mortgage rules use specific triggers and restrict risky terms. HOEPA (Home Ownership and Equity Protection Act) imposes restrictions and additional disclosures for high-cost mortgages. These rules, including prohibitions on certain loan features, must be applied *before* loan consummation (closing). Why the other choices are wrong: "Assume the HOEPA High Cost Mortgage Prohibitions condition is met because the borrower satisfied the separate high-cost loan requirement" is wrong because HOEPA coverage is determined by objective tests (APR and points/fees thresholds), not borrower satisfaction. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HOEPA requirements must be met at or before consummation. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA requires specific written disclosures and documented compliance. Exam tip: HOEPA is triggered if the APR exceeds a specified benchmark or if points and fees exceed a percentage of the loan amount. Pre-consummation compliance is critical.
Why This Is the Correct Answer
The correct response is "Apply high-cost mortgage restrictions before consummation" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
Why the Other Options Are Wrong
Option A: Assume the HOEPA High Cost Mortgage Prohibitions condition is met because the borrower satisfied the separate high-cost loan requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
HOEPA high-cost mortgage 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 HOEPA high-cost mortgage 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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