A small lender originated 22 closed-end mortgage loans last year and 31 the year before, and has decided it is under the reporting threshold. Nobody on the team can name the threshold. What is the first step?
Correct Answer
D) Use Regulation C coverage rules before excluding the file
Why this is correct: The correct answer, "Use Regulation C coverage rules before excluding the file," describes a prudent compliance step. Regulation C implements HMDA, which requires data collection for covered loans. Before deciding a file is excluded from any reporting or analysis, one should first confirm whether the institution and loan are covered under these rules. This ensures decisions are based on the correct legal criteria. 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 override federal fair lending laws like ECOA. "Use the asset documentation standard to decide the ECOA Fair Lending issue before confirming the trigger facts" is wrong because asset documentation is an underwriting criterion, not the primary test for whether ECOA applies. "Rely on oral agreement when the rule requires documented compliance" is wrong because fair lending compliance requires documented policies and non-discriminatory practices. Exam tip: When reviewing files, always apply the correct legal coverage rules (like those in Regulation C for HMDA) as a foundational step before making exclusion decisions.
Why This Is the Correct Answer
The correct response is "Use Regulation C coverage rules before excluding the file" because Covered institutions collect and report HMDA data for covered mortgage applications and loans.
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: Use the asset documentation standard to decide the ECOA Fair Lending issue before confirming the trigger 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: 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
More Federal Laws Questions
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
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 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?
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
An operations lead is resolving ECOA Prohibited Discrimination Bases during a loan-team coaching session. Which action best fits the rule?
In a file escalation meeting, a disclosure specialist sees facts tied to TILA Closing Disclosure. What should the file reflect?
People Also Study
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A processor is resolving SCRA Interest Rate Reduction during an internal audit sample. Which action best fits the rule?
Next Question
A servicer proposes basing PMI termination on the outstanding balance shown on the monthly statement rather than on the initial amortization schedule. On a loan with extra payments the two differ by fourteen months. Which does the statute use for automatic termination?