A team member asks about TILA HPML Appraisal Rules in a compliance desk review while trying to decide how the file should be documented. Which response should a processor use?
Correct Answer
B) Use the subordinate-lien threshold when the loan is junior-lien
Why this is correct: TILA's High-Priced Mortgage Loan (HPML) Appraisal Rules have different coverage thresholds based on lien position. For first-lien loans, the threshold is an Annual Percentage Rate (APR) exceeding the Average Prime Offer Rate (APOR) by 1.5 percentage points. For subordinate-lien loans, the threshold is an APR exceeding APOR by 3.5 percentage points. The correct answer, "Use the subordinate-lien threshold when the loan is junior-lien," correctly applies the specific, higher threshold for junior liens as required by the rule. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because federal HPML appraisal requirements cannot be bypassed by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance is required at origination, not upon regulatory inquiry. "Resolve the TILA HPML Appraisal Rules issue with the TRID timing exception that does not fit the facts" is wrong because TRID timing exceptions are unrelated to HPML appraisal coverage thresholds. Exam tip: For HPML questions, immediately check lien position to determine the correct APR-over-APOR threshold: 1.5% for first lien, 3.5% for subordinate lien.
Why This Is the Correct Answer
The correct response is "Use the subordinate-lien threshold when the loan is junior-lien" because HPML coverage depends on APR-over-APOR thresholds and carries escrow or appraisal duties.
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: Resolve the TILA HPML Appraisal Rules issue with the TRID timing exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
HPML requirements: 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 HPML requirements; 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
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. 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 mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
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A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
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?
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