During a post-application update, the file reviewer encounters a TILA Ability to Repay issue. Which response should select the answer that fits the governing requirement?
Correct Answer
A) Verify ability to repay using reliable third-party records
Why this is correct: The TILA Ability-to-Repay (ATR) rule is a core consumer protection requiring lenders to make a reasonable, good-faith determination of a borrower's ability to repay before extending credit. This determination must be based on verified information from reliable third-party records, such as W-2s, tax returns, or bank statements. The correct answer, "Verify ability to repay using reliable third-party records," directly aligns with this mandatory verification requirement. 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. "Assume the TILA Ability to Repay condition is met because the borrower satisfied the separate fee tolerance requirement" is wrong because ATR and fee tolerance are distinct, unrelated rules; compliance with one does not satisfy the other. "Rely on oral agreement when the rule requires documented compliance" is wrong because ATR verification must be documented; oral statements are insufficient. Exam tip: Remember the ATR rule's core pillars: verify, document, and use reliable third-party records. Internal shortcuts or assumptions are never compliant.
Why This Is the Correct Answer
The correct response is "Verify ability to repay using reliable third-party records" because ATR/QM rules require verified repayment ability and restrict risky QM features.
Why the Other Options Are Wrong
Option B: 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: Assume the TILA Ability to Repay condition is met because the borrower satisfied the separate fee tolerance requirement.
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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