A mortgage file is paused during a lock-desk handoff because of TILA QM Standards. Which answer should separate the real requirement from a near-miss shortcut?
Correct Answer
B) Document income, debts, and simultaneous loans
Why this is correct: The TILA Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules require lenders to make a reasonable, good faith determination of a borrower's repayment ability before extending credit. This core requirement mandates verification and consideration of the borrower's income, assets, employment, current debt obligations, and debt-to-income ratio. The correct answer, "Document income, debts, and simultaneous loans," directly addresses this fundamental requirement by focusing on the factual documentation needed to assess repayment capacity. 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 TILA/QM requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance with ATR/QM is mandatory at origination, not contingent on a regulatory inquiry. "Use prior loan estimate approval as a substitute for the current TILA QM Standards requirement" is wrong because a Loan Estimate is a disclosure of estimated costs, not a substitute for the substantive underwriting and documentation required for ATR/QM. Exam tip: For ATR/QM questions, remember the core concept is verifying the borrower's ability to repay. The correct answer will focus on gathering and documenting financial facts (income, debts, DTI), not on procedural shortcuts or substituting other disclosures.
Why This Is the Correct Answer
The correct response is "Document income, debts, and simultaneous loans" because ATR/QM rules require verified repayment ability and restrict risky QM features.
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: 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: Use prior loan estimate approval as a substitute for the current TILA QM Standards requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
ATR/QM repayment-ability 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 ATR/QM repayment-ability 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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