A quality-control review finds reverse mortgage files disclosed inconsistently, with the framework apparently chosen by whoever opened the file. What is the correct basis for choosing?
Correct Answer
C) Use the correct open-end or closed-end framework
Why this is correct: Ability-to-Repay (ATR) rules under TILA differ for open-end (e.g., HELOCs) and closed-end (e.g., traditional mortgages) credit. The original explanation mentions specialty products require product-specific rules. For an ATR issue, using the correct open-end or closed-end framework ensures compliance with the distinct underwriting and disclosure requirements for each loan type. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because ATR rules must match the product type based on facts. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because ATR is a legal requirement, not waivable by preference. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because open-end and closed-end loans have different ATR standards. Exam tip: For ATR questions, first determine if the loan is open-end or closed-end—this dictates the rule set.
Why This Is the Correct Answer
The correct response is "Use the correct open-end or closed-end framework" because Specialty products such as HELOCs, reverse mortgages, nontraditional loans, and high-cost loans require product-specific rules.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option B: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
ATR Ability to Repay: 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 Ability to Repay; 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 Mortgage Knowledge Questions
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