Before the loan advances, a quality-control reviewer must resolve a ATR/QM repayment-ability rules issue in a supervisory file review. What should happen?
Correct Answer
C) Avoid QM features such as negative amortization or interest-only terms
Why this is correct: The ATR/QM rules under TILA require lenders to make a reasonable, good-faith determination of a borrower's ability to repay. A key component of a Qualified Mortgage (QM) is the prohibition of certain risky loan features, including negative amortization and interest-only periods, which can increase repayment risk. The correct action is to avoid such features to ensure the loan meets QM safe harbor or rebuttable presumption standards, resolving the repayment-ability issue. Why the other choices are wrong: "Treat the QM DTI Calculation review as complete because the file contains a related advertising disclosure note" is wrong because an advertising note does not substitute for verifying the borrower's repayment ability or ensuring the loan lacks prohibited features. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance with ATR/QM rules is mandatory at origination, not deferred. "Rely on oral agreement when the rule requires documented compliance" is wrong because ATR/QM compliance requires written verification and documentation, not oral agreements. Exam tip: Remember that QM loans cannot have negative amortization or interest-only terms; this is a core feature distinguishing them from non-QM loans.
Why This Is the Correct Answer
The correct response is "Avoid QM features such as negative amortization or interest-only terms" because ATR/QM rules require verified repayment ability and restrict risky QM features.
Why the Other Options Are Wrong
Option A: Treat the QM DTI Calculation review as complete because the file contains a related advertising disclosure note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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: 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
ATR/QM repayment-ability rules: 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 ATR/QM repayment-ability rules; 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
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. 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 mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
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?
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