In a pricing desk question, a closing coordinator sees facts tied to HOEPA High Cost Mortgages. What should the file reflect?
Correct Answer
A) Provide required counseling and disclosures when HOEPA applies
Why this is correct: The Home Ownership and Equity Protection Act (HOEPA) imposes special requirements on high-cost mortgages that exceed certain rate or fee thresholds. When a loan is a HOEPA-covered loan, the lender must provide specific, timely disclosures and ensure the borrower receives pre-closing counseling from a HUD-approved counselor. The correct choice, "Provide required counseling and disclosures when HOEPA applies," captures this mandatory action. 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 statutory and cannot be waived by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HOEPA counseling and disclosures are pre-consummation obligations. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA requires formal, documented counseling and written disclosures. Exam tip: Think of HOEPA as a "stop and warn" rule. If the loan triggers the high-cost thresholds, you must stop, provide disclosures, and ensure counseling happens before proceeding.
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 B: 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: 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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