A pre-closing checklist raises a TILA APR Finance Charge question for the loan team. What answer should guide the file?
Correct Answer
D) Base the answer on the covered-credit disclosure rule
Why this is correct: TILA's APR and finance charge are critical disclosures governed by Regulation Z for covered mortgage credit transactions. The rule requires accurate calculation and disclosure. "Base the answer on the covered-credit disclosure rule" means the decision must be grounded in Regulation Z's specific requirements for disclosing APR and finance charge in covered loans. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because Regulation Z's APR/finance charge rules are federal law; internal exceptions cannot override them. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the disclosures must be correct at the time of delivery; waiting is a violation. "Use prior high-cost loan approval as a substitute for the current TILA APR Finance Charge requirement" is wrong because each loan's APR and finance charge must be independently calculated and disclosed per Regulation Z; prior approvals are irrelevant. Exam tip: For TILA APR/finance charge questions, always refer back to the specific disclosure requirements of Regulation Z for covered credit.
Why This Is the Correct Answer
The correct response is "Base the answer on the covered-credit disclosure rule" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
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: Use prior high-cost loan approval as a substitute for the current TILA APR Finance Charge requirement.
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 APR and finance-charge 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 TILA APR and finance-charge 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
More Federal Laws Questions
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