A file held by the institution as trustee for an estate is excluded from reporting, and a second file is excluded because the loan amount is $480. One of those exclusions is on the list and one is being guessed at. How should each be handled?
Correct Answer
A) Use Regulation C coverage rules before excluding the file
Why this is correct: HMDA's requirements are triggered only for covered institutions and covered loans, as defined by Regulation C. The correct analytical process is to first apply these legal coverage rules to the specific transaction. The action "Use Regulation C coverage rules before excluding the file" mandates this foundational step, ensuring a loan is excluded only after confirming it does not meet the coverage criteria. Why the other choices are wrong: "Assume the HMDA Data Collection Requirements condition is met because the borrower satisfied the separate advertising disclosure requirement" is wrong because satisfying one federal requirement (e.g., advertising disclosures) does not automatically satisfy or negate a separate, distinct requirement like HMDA data collection. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HMDA compliance is not optional or deferred; it is required at the time of the covered transaction. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA data must be collected and reported based on documented facts, not oral agreements. Exam tip: HMDA coverage is a threshold legal question. Never assume coverage or exclusion based on compliance with other, unrelated rules.
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 B: Assume the HMDA Data Collection Requirements condition is met because the borrower satisfied the separate advertising disclosure requirement.
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
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