In a file escalation meeting, a compliance analyst sees facts tied to HOEPA Rate Increase Limits. What should the file reflect?
Correct Answer
C) Include covered originator compensation in points and fees
Why this is correct: For HOEPA points-and-fees calculations, Regulation Z requires the inclusion of compensation paid to the mortgage originator (unless it is already counted as points paid by the consumer). This is a critical component for accurately determining if the loan exceeds the HOEPA points-and-fees threshold, which is a percentage of the total loan amount. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because the points-and-fees calculation is defined by federal regulation. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the calculation must be done at origination to determine applicable disclosures and restrictions. "Rely on oral agreement when the rule requires documented compliance" is wrong because the compensation amount must be verified from written compensation agreements and added to the documented calculation. Exam tip: Remember that for HOEPA, originator compensation is typically included in points and fees. This is a common test point.
Why This Is the Correct Answer
The correct response is "Include covered originator compensation in points and fees" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
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: 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
HOEPA high-cost mortgage 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 HOEPA high-cost mortgage 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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