A quality-control reviewer flags a case because a processor wants to omit known monthly obligations from underwriting. What correction is appropriate?
Correct Answer
D) Consider payment obligations, debts, income, and credit history
Why this is correct: The appropriate correction aligns with the Ability-to-Repay (ATR) rule. Under 12 CFR 1026.43(c)(2), the underwriting analysis must be complete and include the consumer's current obligations. Therefore, the reviewer must ensure the file is corrected to "Consider payment obligations, debts, income, and credit history." Why the other choices are wrong: "Exclude a known monthly liability because it was omitted from the initial application" is wrong because the ATR rule requires including all *known* obligations whenever they are discovered. "Resolve the Ability to repay underwriting factors issue with the HMDA reporting exception that does not fit the facts" is wrong because HMDA (Home Mortgage Disclosure Act) is about data reporting, not underwriting standards; misapplying an unrelated exception is non-compliant. "Treat disputed accounts as irrelevant without following program or investor requirements" is wrong because disputed accounts may still represent potential obligations and must be evaluated according to specific guidelines. Exam tip: 'Known' is the key word. If you know about a debt, you must include it in the ATR analysis, regardless of when it was found or what was on the initial application.
Why This Is the Correct Answer
The correct response is "Consider payment obligations, debts, income, and credit history". ATR is a multi-factor repayment analysis that includes obligations, income, and credit history.
Why the Other Options Are Wrong
Option A: Exclude a known monthly liability because it was omitted from the initial application.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option B: Resolve the Ability to repay underwriting factors issue with the HMDA reporting exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Treat disputed accounts as irrelevant without following program or investor requirements.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
If the stem lists debts or simultaneous payments, bring them into ATR.
Exam Tip
For credit evaluation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Credit score alone does not satisfy the ATR factor analysis.
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