Before the team acts on a branch training session, a licensing coordinator must address HOEPA High Cost Mortgage. Which response is most defensible?
Correct Answer
B) Include covered originator compensation in points and fees
Why this is correct: The Home Ownership and Equity Protection Act (HOEPA) defines high-cost mortgages using triggers including points and fees. Under the rule, points and fees must include compensation paid to the loan originator (unless from the creditor). The correct choice accurately states this key component of the points-and-fees calculation. Why the other choices are wrong: Using an internal exception is not permitted to avoid HOEPA's strict requirements. Applying a general advertising concept to the wrong stage misapplies the rule; HOEPA has specific disclosures and restrictions. Relying on an oral agreement is non-compliant, as HOEPA mandates written disclosures and documented adherence. Exam tip: For HOEPA, know the two main triggers: the APR threshold and the points-and-fees threshold, which must include originator compensation.
Why This Is the Correct Answer
The correct response is "Include covered originator compensation in points and fees" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
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 C: Apply the correct general concept to the wrong advertising disclosure stage rather than the HOEPA High Cost Mortgage rule.
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
HOEPA high-cost mortgage 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 HOEPA high-cost mortgage 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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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?
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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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