A mortgage operations checklist raises a question about TILA advertising. Which action should the state compliance officer recommend?
Correct Answer
A) State the APR when advertising a rate
Why this is correct: Regulation Z (TILA) has specific rules for mortgage advertising. If an advertisement states specific credit terms (like an interest rate), it must also state the Annual Percentage Rate (APR). This prevents misleading consumers by highlighting a low rate while hiding high fees. The correct action, "State the APR when advertising a rate," is a direct and mandatory requirement under these advertising rules. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because federal advertising rules are strict and do not permit internal overrides. "Wait until a regulator asks for the file before applying the federal requirement" is wrong as it describes a non-compliant, reactive stance. "Rely on oral agreement when the rule requires documented compliance" is wrong because advertising disclosures must be clear and conspicuous in the advertisement itself, not conveyed orally. Exam tip: In advertising, mentioning a specific trigger term (like rate, payment, or down payment) triggers the requirement to disclose other key terms, most importantly the APR. No trigger term? Then APR disclosure may not be required, but ads must still be truthful and non-deceptive.
Why This Is the Correct Answer
The correct response is "State the APR when advertising a rate" because Mortgage advertisements must be truthful and include required APR or trigger-term disclosures.
Why the Other Options Are Wrong
Option B: 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 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
TILA advertising: 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 advertising; 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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A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
An operations lead is resolving ECOA Prohibited Discrimination Bases during a loan-team coaching session. Which action best fits the rule?
In a file escalation meeting, a disclosure specialist sees facts tied to TILA Closing Disclosure. What should the file reflect?
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