A file review raises a question about HMDA reporting. Which action should the operations lead recommend?
Correct Answer
B) Use Regulation C coverage rules before excluding the file
Why this is correct: The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, requires covered financial institutions to collect, record, and report data about mortgage applications and loans. The first step in any HMDA question is to determine if the institution and the loan are covered under Regulation C's specific coverage rules (based on loan type, institution asset size, and location). Therefore, before excluding a file from reporting, one must first apply these coverage rules. Why the other choices are wrong: Using an internal exception instead of the required federal disclosure or timing rule is wrong because HMDA reporting is a legal mandate, not subject to internal policy overrides. Waiting until a regulator asks for the file before applying the federal requirement is wrong because data must be collected and reported annually, regardless of a regulator's request. Treating the ECOA Fair Lending review as complete because the file contains a related advertising disclosure note is wrong because HMDA reporting and ECOA (Equal Credit Opportunity Act) fair lending reviews are separate compliance areas; a note on one does not satisfy the other. Exam tip: HMDA is about data collection and reporting. Step one is always: Check if Regulation C 'coverage rules' apply to the institution and the loan.
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 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: Treat the ECOA Fair Lending review as complete because the file contains a related advertising disclosure note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
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