A mortgage file is paused during a policy refresh meeting because of TILA Ability to Repay Rule. Which answer should choose the compliant next step?
Correct Answer
C) Document income, debts, and simultaneous loans
Why this is correct: The TILA Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good faith determination of a consumer's ability to repay a mortgage before extending credit. This determination must be based on verified and documented information. The correct action, "Document income, debts, and simultaneous loans," is a core requirement of the ATR rule, as these are the key financial factors that must be considered and verified. 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 ATR requirements, which are not subject to discretionary exceptions. "Delay the TILA Ability to Repay Rule step until a later reverse-mortgage occupancy review instead of acting now" is wrong because ATR verification is a prerequisite to closing; it cannot be delayed to an unrelated later review. "Rely on oral agreement when the rule requires documented compliance" is wrong because the ATR rule explicitly requires documentation and verification; oral statements are insufficient. Exam tip: For ATR, think "verify and document." The rule mandates proof of the borrower's financial capacity through documentation.
Why This Is the Correct Answer
The correct response is "Document income, debts, and simultaneous loans" 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 B: Delay the TILA Ability to Repay Rule step until a later reverse-mortgage occupancy review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
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