A team member asks about TILA Higher Priced Mortgage Loans in a daily pipeline review while trying to identify which rule controls the file. Which response should the file reviewer use?
Correct Answer
C) Check escrow and appraisal duties for a covered HPML
Why this is correct: For a loan identified as a Higher-Priced Mortgage Loan (HPML), two of the primary additional requirements are the establishment of an escrow account for property taxes and insurance (for most first-lien loans) and compliance with special appraisal rules (e.g., a written appraisal by a certified appraiser). "Check escrow and appraisal duties for a covered HPML" directly addresses these key compliance checks that must be performed on a file. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HPML's escrow and appraisal mandates are federal law, not subject to internal override. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because these duties must be fulfilled before the loan closes. "Apply the correct general concept to the wrong asset documentation stage rather than the TILA Higher Priced Mortgage Loans rule" is wrong because it describes a misapplication of a rule, which is not a proper compliance step. Exam tip: When you see "HPML," think of two major added burdens: escrow accounts and special appraisal rules. Both apply if the loan is covered.
Why This Is the Correct Answer
The correct response is "Check escrow and appraisal duties for a covered HPML" because HPML coverage depends on APR-over-APOR thresholds and carries escrow or appraisal duties.
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 asset documentation stage rather than the TILA Higher Priced Mortgage Loans 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
HPML requirements: 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 HPML requirements; 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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Previous Question
A mortgage file is paused during a risk-control review because of ECOA Adverse Action Notice. Which answer should explain the required action to the team?
Next Question
A seller acquired legal title for $188,000. The consumer's agreement to buy the home for $268,000 is dated 140 days after that acquisition. The purchase uses a higher-priced mortgage subject to section 1026.35(c), with no general or additional-appraisal exemption. Is an additional appraisal required, and may the consumer be charged for both appraisals?