During a training quiz scenario, the MLO encounters a TILA Closing Disclosure Timing issue. Which response should explain the required action to the team?
Correct Answer
D) Base the answer on the covered-credit disclosure rule
Why this is correct: TILA's Closing Disclosure timing rule is part of the broader "covered-credit disclosure rule" established by Regulation Z and integrated by TRID. For most closed-end consumer mortgages, the lender must ensure the borrower receives the Closing Disclosure at least three business days before consummation. "Base the answer on the covered-credit disclosure rule" correctly directs the MLO to apply the specific federal timing mandate for the Closing Disclosure. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal policies cannot override the mandatory three-day waiting period. "Apply the correct general concept to the wrong ability-to-repay stage rather than the TILA Closing Disclosure Timing rule" is wrong because Ability-to-Repay is a separate requirement (under Regulation Z) from disclosure timing. "Rely on oral agreement when the rule requires documented compliance" is wrong because the rule requires providing the written Closing Disclosure; oral communication does not suffice. Exam tip: The '3-day rule' for the Closing Disclosure is sacred. It's based on business days (all days except Sundays and federal holidays) and is triggered by receiving the disclosure, not mailing it.
Why This Is the Correct Answer
The correct response is "Base the answer on the covered-credit disclosure rule" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
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: Apply the correct general concept to the wrong ability-to-repay stage rather than the TILA Closing Disclosure Timing rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: 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
TILA APR and finance-charge 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 TILA APR and finance-charge 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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