An MLO is reviewing procedures for a case where a HELOC will provide funds for the down payment on the same dwelling. What is the proper handling?
Correct Answer
A) Include the HELOC payment in the ATR analysis
Why this is correct: The proper handling is mandated by the Ability-to-Repay rule. A HELOC providing the down payment is a simultaneous closed-end mortgage loan or home equity line of credit. Under 12 CFR 1026.43(c)(2)(iv) and (c)(6), the creditor must include the periodic payment for this known obligation when calculating the borrower's monthly debt-to-income ratio and assessing repayment ability. Why the other choices are wrong: "Use funds from an undisclosed account without updating the file" is wrong because it violates fundamental requirements for sourcing and documenting assets. "Resolve the Simultaneous loan in ATR analysis issue with the fee tolerance exception that does not fit the facts" is wrong because the fee tolerance exception relates to changes in closing costs, not to the inclusion of debt payments in the ATR calculation. "Use unexplained large deposits as verified assets" is wrong because it describes an error in asset verification where large deposits must be sourced, not a solution for the simultaneous loan debt. Exam tip: In ATR, 'known' debts are counted. If you know about the HELOC at closing, you must count its payment.
Why This Is the Correct Answer
The correct response is "Include the HELOC payment in the ATR analysis". A known simultaneous HELOC affects monthly obligations and must be considered for repayment ability.
Why the Other Options Are Wrong
Option B: Use funds from an undisclosed account without updating the file.
This choice is a tempting shortcut, but it conflicts with asset verification because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Resolve the Simultaneous loan in ATR analysis issue with the fee tolerance exception that does not fit the 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: Use unexplained large deposits as verified assets.
This choice is not the best answer because it applies the wrong file step for asset verification; the governing rule is tested by the correct option.
Memory Technique
Same dwelling plus known simultaneous credit means include the payment.
Exam Tip
For asset verification questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -A separate loan can still be a simultaneous obligation for ATR.
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