Before the team acts on a supervisory file review, the MLO must address TILA Qualified Mortgage. Which response is most defensible?

Correct Answer

C) Calculate points and fees under the applicable Regulation Z rule

Why this is correct: A TILA Qualified Mortgage (QM) must comply with the Ability-to-Repay (ATR) rules and, crucially, must not exceed the points and fees cap set by Regulation Z. Therefore, the most defensible action when addressing a TILA QM issue is to perform the required calculation of points and fees under the specific Regulation Z rule. This ensures the loan meets the legal standard for a QM, which provides the lender with certain legal protections. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because QM rules are specific; applying an unrelated rule would not demonstrate compliance. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because QM standards include limits on debt-to-income ratios and product features; borrower preference cannot override these. "Treat the TILA Qualified Mortgage review as complete because the file contains a related income calculation note" is wrong because a note on income calculation is only one part of the ATR/QM assessment; it does not confirm compliance with the separate and mandatory points and fees calculation. Exam tip: Remember the two main QM pillars: 1) Ability-to-Repay (with DTI limits for certain QMs) and 2) the Points and Fees Cap. Always verify both. The calculation under Reg Z is non-negotiable.