A mortgage file is paused during a risk-control review because of TILA HELOC Requirements. Which answer should choose the compliant next step?
Correct Answer
C) Apply HELOC open-end disclosure rules
Why this is correct: HELOCs are open-end credit plans under Regulation Z, requiring specific disclosures (like the HELOC brochure and account-opening disclosures) and a three-day right of rescission if secured by the borrower's principal dwelling. Applying these open-end rules ensures TILA compliance. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" might incorrectly apply closed-end mortgage rules to a HELOC. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" violates underwriting standards. "Treat the TILA HELOC Requirements review as complete because the file contains a related quality-control note" is wrong because a note does not substitute for applying the actual HELOC disclosure rules. Exam tip: For HELOCs, remember they are open-end credit with unique disclosure and rescission rules—don't treat them like closed-end loans.
Why This Is the Correct Answer
The correct response is "Apply HELOC open-end disclosure rules" because HELOCs are open-end credit plans secured by a dwelling with special disclosures and rescission rules when secured by a principal dwelling.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option B: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Treat the TILA HELOC Requirements review as complete because the file contains a related quality-control note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
HELOC and open-end credit 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 HELOC and open-end credit 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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