A processor asks how to handle a file where a compliance analyst asks why covered mortgage application data is collected. Which response is most accurate?
Correct Answer
A) Collect and report covered mortgage lending data
Why this is correct: The most accurate response is based on the Home Mortgage Disclosure Act (HMDA), implemented by Regulation C (12 CFR Part 1003). HMDA's core purpose is to require covered financial institutions to collect, record, and report data about their mortgage lending activity. This data is used to monitor for fair lending compliance and community investment. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HMDA is a federal data collection and reporting mandate; internal policies cannot create exceptions to its requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA requires proactive, ongoing data collection and annual reporting; waiting for a regulator's request constitutes non-compliance. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA requires specific data to be collected and reported in writing; oral agreements are irrelevant to this statutory duty. Exam tip: Remember HMDA's primary function: data collection and reporting. It's about gathering loan application information for analysis.
Why This Is the Correct Answer
The correct response is "Collect and report covered mortgage lending data" because Lines 76-82; 12 CFR Part 1003 summary.
Why the Other Options Are Wrong
Option B: 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: 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
HMDA reporting: 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 HMDA reporting; 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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