A regulator exam preparation raises a question about TILA advertising. Which action should the licensing coordinator recommend?
Correct Answer
C) State the APR when advertising a rate
Why this is correct: TILA's advertising rules (Regulation Z) require that if a specific credit term (like the payment amount, APR, or finance charge) is advertised, then all other required terms must also be disclosed. A fundamental rule is that if an advertisement states a rate of finance charge, it must state the Annual Percentage Rate (APR) clearly and conspicuously. "State the APR when advertising a rate" is a core, compliant action under these requirements. 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 disclosure mandates. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because advertising rules are proactive compliance obligations. "Apply the correct general concept to the wrong closing disclosure stage rather than the TILA Advertising Requirements rule" is wrong because advertising rules are distinct from closing disclosure timing rules under TRID. Exam tip: In ads, 'trigger terms' (like payment amount or rate) pull in other required disclosures, most importantly the APR. No trigger terms? Fewer disclosures are needed, but ads must still be truthful.
Why This Is the Correct Answer
The correct response is "State the APR when advertising a rate" because Mortgage advertisements must be truthful and include required APR or trigger-term disclosures.
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 D: Apply the correct general concept to the wrong closing disclosure stage rather than the TILA Advertising Requirements rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
TILA advertising: 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 TILA advertising; 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?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
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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