A mortgage file is paused during a secondary-market screen because of HOEPA High Cost Mortgages. Which answer should choose the compliant next step?
Correct Answer
B) Apply high-cost mortgage restrictions before consummation
Why this is correct: HOEPA (Home Ownership and Equity Protection Act) imposes additional restrictions and disclosures for high-cost mortgages, which are defined by specific triggers for the APR or points and fees. If a loan is identified as high-cost during a secondary-market screen, the compliant step is to apply these restrictions (e.g., prohibitions on certain loan terms, mandatory counseling) before the loan is consummated (closed). Why the other choices are wrong: "Delay the HOEPA High Cost Mortgages step until a later PMI cancellation review instead of acting now" is wrong because HOEPA compliance is required before consummation; delaying could result in an illegal loan. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance is mandatory, not optional pending inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA requires specific written disclosures and cannot be satisfied orally. Exam tip: HOEPA is triggered by specific numerical thresholds for APR or points and fees. Know these triggers to identify a high-cost mortgage.
Why This Is the Correct Answer
The correct response is "Apply high-cost mortgage restrictions before consummation" 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: Delay the HOEPA High Cost Mortgages step until a later PMI cancellation review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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: 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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During a post-application update, a disclosure specialist encounters a HOEPA High Cost Mortgage Restrictions issue. Which response should confirm the rule-based response?
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