A mortgage file is paused during a policy refresh meeting because of TILA Finance Charge. Which answer should select the answer that fits the governing requirement?
Correct Answer
C) Use the Regulation Z disclosure rule before closing
Why this is correct: The finance charge is a key component of TILA disclosures under Regulation Z. It must be accurately calculated and disclosed to the borrower before closing (in the Loan Estimate and Closing Disclosure). "Use the Regulation Z disclosure rule before closing" correctly states that the finance charge must be determined and disclosed according to Regulation Z's requirements prior to consummation. 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 federal Regulation Z finance charge calculation and disclosure rules. "Use the refinance benefit standard to decide the TILA Finance Charge issue before confirming the trigger facts" is wrong because refinance benefits are unrelated to the proper calculation and disclosure of the finance charge under Regulation Z. "Rely on oral agreement when the rule requires documented compliance" is wrong because the finance charge must be disclosed in writing; oral statements are insufficient. Exam tip: For TILA finance charge questions, the rule is always: follow Regulation Z's calculation and disclosure requirements.
Why This Is the Correct Answer
The correct response is "Use the Regulation Z disclosure rule before closing" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
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: Use the refinance benefit standard to decide the TILA Finance Charge issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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 APR and finance-charge 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 TILA APR and finance-charge 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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