A twelve-month construction loan is filed as temporary financing and excluded. It is written to convert to permanent financing with the same lender at completion. What does that require the reviewer to do?

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, record, and report specific data about mortgage applications and loans. The core compliance step is to first determine if the loan or application is covered under Regulation C's specific coverage rules (e.g., loan type, property type, institutional activity). Only after applying these rules can a file be correctly excluded from reporting. The correct action is to "Use Regulation C coverage rules before excluding the file." 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 federal HMDA reporting mandates. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA compliance is proactive and required at the time of application, not upon regulatory inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA reporting requires documented, verifiable data collection, not oral agreements. Exam tip: For HMDA questions, remember the sequence: first check Regulation C coverage rules, then collect/report data. Never assume a file is excluded without checking the rule first.