A branch manager asks about a loan file because a compliance analyst asks why covered mortgage application data is collected. What should happen?
Correct Answer
C) Collect and report covered mortgage lending data
The Home Mortgage Disclosure Act (HMDA), via Regulation C, requires covered institutions to collect and report data on covered mortgage loans. This duty arises from the nature of the transaction, not from a regulator's request. Why this is correct: "Collect and report covered mortgage lending data" is the action required by HMDA whenever a covered mortgage application is taken. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HMDA has no provision for "internal exceptions" to its mandatory data collection. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA compliance is proactive; institutions must collect and report data annually, not merely upon request. "Assume the HMDA data collection and reporting condition is met because the borrower satisfied the separate anti-steering requirement" is wrong because satisfying one rule (like anti-steering) does not fulfill a completely separate HMDA obligation. Exam tip: HMDA compliance is an ongoing, institutional duty. Do not confuse it with other, distinct consumer protection rules.
Why This Is the Correct Answer
The correct response is "Collect and report covered mortgage lending data" because Lines 76-82; 12 CFR Part 1003 summary.
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: 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: Assume the HMDA data collection and reporting condition is met because the borrower satisfied the separate anti-steering requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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
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