A purchase of servicing rights on 1,800 loans is entered on the register as 1,800 purchased loans. A reviewer suspects the entries do not belong there. How should that be resolved?
Correct Answer
B) Use Regulation C coverage rules before excluding the file
Why this is correct: The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, requires covered institutions to collect, report, and disclose data about mortgage applications and loans. A fair lending analysis under HMDA must first determine if the loan or application is covered by Regulation C's coverage rules (based on loan type, institution type, and location). The correct step is to apply these coverage rules before deciding to exclude a file from the HMDA analysis. Why the other choices are wrong: "Apply the correct general concept to the wrong quality-control stage rather than the HMDA Fair Lending Analysis rule" is wrong because it misapplies a correct principle to an incorrect process stage, failing the specific HMDA analysis. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA compliance is proactive and mandatory, not reactive. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA data collection and reporting require written records and documentation. Exam tip: For HMDA, always check Regulation C coverage first—if the loan/application is not covered, HMDA rules do not apply.
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: Apply the correct general concept to the wrong quality-control stage rather than the HMDA Fair Lending Analysis rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
More Federal Laws Questions
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