A mortgage file is paused during a secondary-market screen because of HOEPA Points and Fees. Which answer should apply the requirement without relying on borrower preference?
Correct Answer
D) Test the loan against HOEPA high-cost triggers
Why this is correct: HOEPA (Home Ownership and Equity Protection Act) defines high-cost mortgages using specific numerical triggers for the annual percentage rate (APR), total points and fees, and prepayment penalties. When a file is paused due to HOEPA points and fees concerns, the required action is to perform the actual mathematical test against these statutory triggers to determine if the loan qualifies as a high-cost mortgage, which would subject it to additional restrictions and disclosures. 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 law. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance is mandatory at the time of origination, not upon regulatory inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA determinations and disclosures require written, verifiable documentation. Exam tip: When you see "HOEPA" and "points and fees," your immediate mental step should be: calculate and test against the thresholds.
Why This Is the Correct Answer
The correct response is "Test the loan against HOEPA high-cost triggers" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
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: 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 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
HOEPA high-cost mortgage 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 HOEPA high-cost mortgage 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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