A compliance exception review raises a TILA Right of Rescission question for an audit analyst. What answer should guide the file?
Correct Answer
C) Count the rescission period under the TILA rule
Why this is correct: TILA (Truth in Lending Act) provides a right of rescission for certain loans secured by the borrower's principal dwelling (e.g., most refinances). The rescission period generally lasts until midnight of the third business day after consummation, delivery of the notice of right to rescind, or delivery of all material disclosures, whichever is latest. Therefore, the correct action is to accurately count this three-business-day rescission period to ensure the borrower's rights are protected and the file is compliant. 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 shorten or override the federally mandated rescission period. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the right of rescission and its timing are active legal requirements that must be honored at loan closing. "Rely on oral agreement when the rule requires documented compliance" is wrong because the notice of right to rescind and the waiting period must be properly documented. Exam tip: The right of rescission applies to refinances of a principal dwelling (not purchases). Always count three business days, excluding Sundays and federal holidays.
Why This Is the Correct Answer
The correct response is "Count the rescission period under the TILA rule" because TILA rescission rights protect consumers with ownership interests in a principal dwelling.
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: 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
TILA right of rescission: 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 right of rescission; 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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