The branch manager compares the file facts with TILA HPML Rules during a borrower follow-up call. Which conclusion is accurate?
Correct Answer
B) Check escrow and appraisal duties for a covered HPML
Why this is correct: TILA's High-Priced Mortgage Loan (HPML) rules impose additional consumer protections for certain closed-end mortgages. A loan is an HPML if its APR exceeds the Average Prime Offer Rate (APOR) by a specified threshold. For covered HPMLs, the rules mandate special requirements, including establishing escrow accounts for property taxes and insurance for most first-lien mortgages, and often requiring a higher-standard appraisal. The correct action, "Check escrow and appraisal duties for a covered HPML," is the necessary first step to ensure compliance. 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 law. "Use the ability-to-repay standard to decide the TILA HPML Rules issue before confirming the trigger facts" is wrong because the Ability-to-Repay rule (ATR) is a separate, parallel requirement; HPML coverage is determined solely by comparing APR to APOR. "Rely on oral agreement when the rule requires documented compliance" is wrong because HPML escrow and appraisal requirements must be documented and disclosed in writing. Exam tip: HPML coverage is a pure math test: compare the loan's APR to the published APOR. If it exceeds the threshold, the HPML escrow and appraisal rules apply (with some exemptions).
Why This Is the Correct Answer
The correct response is "Check escrow and appraisal duties for a covered HPML" because HPML coverage depends on APR-over-APOR thresholds and carries escrow or appraisal duties.
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: Use the ability-to-repay standard to decide the TILA HPML Rules 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
HPML requirements: 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 HPML requirements; 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
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. 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 mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
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?
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