Before the loan advances, a quality-control reviewer must resolve a TILA advertising issue during a TILA advertising review. What should happen?
Correct Answer
B) State the APR when advertising a rate
Why this is correct: The Truth in Lending Act (TILA) and its implementing Regulation Z set strict rules for advertising credit terms. A core requirement is that if an advertisement states a specific credit term (like an interest rate), it must also state the Annual Percentage Rate (APR) clearly and conspicuously. The APR is a more complete cost measure as it includes certain finance charges. Therefore, the correct action to resolve a TILA advertising issue is to ensure the APR is stated when advertising a rate. 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 mandatory federal disclosure laws like TILA. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance is required proactively, not only upon regulatory inquiry. "Assume the TILA Advertising Requirements condition is met because the borrower satisfied the separate PMI cancellation requirement" is wrong because PMI cancellation is governed by a different law (the Homeowners Protection Act) and has no bearing on TILA advertising compliance. Exam tip: Remember the TILA advertising trigger terms. Advertising a rate, payment amount, or down payment triggers the requirement to disclose the APR and other key terms.
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 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 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: Assume the TILA Advertising Requirements condition is met because the borrower satisfied the separate PMI cancellation requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
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?
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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