Before the team acts on a supervisory file review, a risk reviewer must address Discount Points Calculation. Which response is most defensible?

Correct Answer

B) Use points-and-fees totals before classifying the loan

Discount points are upfront fees paid by the borrower to reduce the interest rate. Their calculation is critical because points and fees totals are used to classify loans under key regulations, such as determining if a loan is a High-Cost Mortgage (HOEPA) or a Qualified Mortgage (QM), and for calculating the Annual Percentage Rate (APR). Why this is correct: "Use points-and-fees totals before classifying the loan" is correct because the total of points and fees is a regulatory threshold. For example, under the Ability-to-Repay/Qualified Mortgage rule, points and fees generally cannot exceed 3% of the loan amount for most QM loans. This total must be accurately calculated to ensure proper loan classification and compliance. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because points and fees calculations are fact-specific; using an unrelated rule without verifying the actual numbers is a compliance failure. "Use prior changed-circumstance approval as a substitute for the current Discount Points Calculation requirement" is wrong because a changed-circumstance approval relates to disclosures under TRID, not to the fundamental calculation of points and fees for loan classification. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because points and fees caps and definitions can vary by loan product (e.g., conventional, FHA, VA). Exam tip: Points and fees are a key test for QM status (generally ≤3%) and HOEPA triggers. Always calculate the total accurately before making any classification.