Before the loan advances, a state compliance officer must resolve a TILA right of rescission issue during a TILA right of rescission review. What should happen?
Correct Answer
D) Recognize rescission applies to covered principal-dwelling security interests
Why this is correct: TILA's right of rescission generally applies to certain loans (like refinances) secured by the borrower's principal dwelling where the borrower has an ownership interest. It allows the borrower a three-business-day period to cancel. The correct choice correctly identifies this scope. Why the other choices are wrong: Using an internal exception is not permitted; the right of rescission is a mandatory consumer protection. Waiting for a regulator to ask is a violation, as the right must be honored proactively. Delaying the step until a later TRID review is incorrect; rescission timing is separate and must be addressed before closing for covered loans. Exam tip: Remember, rescission does NOT apply to purchase-money mortgages, reverse mortgages, or loans to acquire initial construction of a dwelling.
Why This Is the Correct Answer
The correct response is "Recognize rescission applies to covered principal-dwelling security interests" because TILA rescission rights protect consumers with ownership interests in a principal dwelling.
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 C: Delay the TILA Right of Rescission step until a later TRID timing review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
TILA right of rescission: 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 TILA right of rescission; 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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