During a borrower intake review, the loan team encounters a HOEPA Points and Fees issue. Which response should resolve the issue before the file moves forward?
Correct Answer
D) Provide required counseling and disclosures when HOEPA applies
Why this is correct: The Home Ownership and Equity Protection Act (HOEPA) covers high-cost mortgages. When a loan's APR or points and fees exceed specified triggers, it becomes a HOEPA loan, triggering special protections for the borrower. These include mandatory pre-loan counseling and specific disclosures. The compliant response is to provide these required protections. The correct answer is "Provide required counseling and disclosures when HOEPA applies." Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HOEPA's requirements are federal law and cannot be overridden by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HOEPA protections must be applied at origination if the loan is high-cost; waiting is non-compliant. "Apply the correct general concept to the wrong fee tolerance stage rather than the HOEPA Points and Fees rule" is wrong because it describes misapplying a rule (like TRID tolerances) to a HOEPA issue, which fails to address the specific high-cost mortgage requirements. Exam tip: HOEPA is triggered by high rates/fees. If it applies, mandatory counseling and disclosures are required—no exceptions.
Why This Is the Correct Answer
The correct response is "Provide required counseling and disclosures when HOEPA applies" 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: 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 B: 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 C: Apply the correct general concept to the wrong fee tolerance stage rather than the HOEPA Points and Fees rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
More Federal Laws Questions
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A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
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A lender mails the loan estimate on Monday 8 June rather than delivering it in person. Consummation is set for Friday 19 June.
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
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