During a borrower intake review, the file reviewer encounters a TILA Higher Priced Mortgages issue. Which response should decide how the file should be documented?
Correct Answer
B) Avoid QM features such as negative amortization or interest-only terms
Why this is correct: The question involves a TILA Higher-Priced Mortgage Loan (HPML). To properly document the file, the lender must ensure the loan can meet Qualified Mortgage (QM) standards if intended. Avoiding prohibited QM features like negative amortization and interest-only terms is a necessary step for QM compliance, which is a key documentation requirement. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is incorrect because federal TILA/ATR rules cannot be overridden by internal policies. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance must be documented at or before consummation. "Rely on oral agreement when the rule requires documented compliance" is incorrect as ATR/QM rules require verified, documented evidence. Exam tip: For HPMLs, ensuring the loan avoids features prohibited for QMs (like negative amortization) is a core part of compliant underwriting and file documentation.
Why This Is the Correct Answer
The correct response is "Avoid QM features such as negative amortization or interest-only terms" because ATR/QM rules require verified repayment ability and restrict risky QM features.
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 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
ATR/QM repayment-ability 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 ATR/QM repayment-ability 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
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
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?
A completed application arrives on 4 May. The lender declines it on 20 May and posts the notice on 8 June.
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?
People Also Study
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam