During a training quiz scenario, a closing coordinator encounters a TILA Advertising Requirements issue. Which response should apply the requirement without relying on borrower preference?
Correct Answer
B) Apply HELOC open-end disclosure rules
Why this is correct: The governing concept is that TILA (Truth in Lending Act) has specific advertising requirements, and for HELOCs (Home Equity Lines of Credit), these are governed by open-end credit rules. As the original explanation notes, HELOCs are open-end plans with special disclosure and rescission rules. The correct action is to apply the specific open-end disclosure framework mandated for HELOC advertisements, ensuring compliance independent of borrower wishes. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because applying an incorrect rule (e.g., closed-end rules to an open-end HELOC) violates TILA. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because advertising rules are legal mandates, not subject to borrower preference. "Resolve the TILA Advertising Requirements issue with the escrow analysis exception that does not fit the facts" is wrong because it misapplies an unrelated exception (for escrow) to an advertising problem, which is not a valid resolution. Exam tip: For TILA advertising, always identify the product type first: open-end (HELOC) and closed-end loans have different required disclosures in ads.
Why This Is the Correct Answer
The correct response is "Apply HELOC open-end disclosure rules" because HELOCs are open-end credit plans secured by a dwelling with special disclosures and rescission rules when secured by a principal dwelling.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Resolve the TILA Advertising Requirements issue with the escrow analysis 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.
Memory Technique
HELOC and open-end credit 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 HELOC and open-end credit 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 Mortgage Knowledge Questions
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The loan team compares the file facts with ARM Cap Structures during a borrower follow-up call. Which conclusion is accurate?
A borrower has a 30-year fixed-rate mortgage with monthly principal and interest of $1,450. Property taxes increase, and taxes are paid through escrow. What can happen to the total monthly payment?
A loan has an outstanding principal balance of $240,000 and a 6% annual interest rate. Using simple monthly accrual, how much interest accrues for one month?
An annual escrow analysis for a current borrower shows a $780 shortage. One month's escrow payment is $600. The servicer elects to require repayment over the shortest installment period permitted by Regulation X for this shortage. What schedule is permitted?
What does an amortization schedule show for each scheduled payment?
A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
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