An institution buys 240 closed-end mortgage loans in a single transaction and records none of them, on the view that only loans it originated are reportable. What should be checked first?
Correct Answer
A) Use Regulation C coverage rules before excluding the file
Why this is correct: The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, requires covered financial institutions to collect, report, and publicly disclose data about mortgage applications and loans. The first step in any HMDA question is to determine if the institution and the loan are covered under Regulation C's specific coverage rules before deciding if reporting is required or if the file can be excluded. Why the other choices are wrong: "Use the refinance benefit standard to decide the HMDA Reporting Requirements issue before confirming the trigger facts" is wrong because while refinancing is a covered transaction, coverage must first be established using Regulation C rules (institutional and transactional tests). "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA reporting is an annual mandatory obligation, not something triggered by a regulator's request. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA requires systematic data collection and formal reporting, not informal agreements. Exam tip: HMDA's Regulation C has specific coverage tests. Always ask: Is the institution covered? Is the loan type covered? Start with coverage rules.
Why This Is the Correct Answer
The correct response is "Use Regulation C coverage rules before excluding the file" because Covered institutions collect and report HMDA data for covered mortgage applications and loans.
Why the Other Options Are Wrong
Option B: Use the refinance benefit standard to decide the HMDA Reporting Requirements issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
HMDA reporting: 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 HMDA reporting; 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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