Before closing, the team discovers that a compliance analyst asks why covered mortgage application data is collected. What is the safest compliant answer?
Correct Answer
D) Collect and report covered mortgage lending data
Why this is correct: The Home Mortgage Disclosure Act (HMDA) and its implementing Regulation C (12 CFR Part 1003) establish a mandatory framework for covered financial institutions. The core purpose is to collect and report specific data about mortgage loan applications and originations to provide transparency and help identify potential discriminatory lending patterns. The question asks for the safest compliant answer to why this data is collected. The only action that is fully compliant with the law is to simply follow the rule: collect and report the data as required. The original explanation correctly anchors this in the HMDA/Reg C summary, which defines the law as a data collection and reporting framework. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HMDA requirements are federal law; internal company policies cannot override or substitute for mandatory federal disclosures and deadlines. "Resolve the HMDA data collection and reporting issue with the state renewal exception that does not fit the facts" is wrong because state-level exceptions or renewals do not relieve an institution from complying with federal HMDA requirements, especially when the exception doesn't apply to the situation. "Rely on oral agreement when the rule requires documented compliance" is wrong because HMDA compliance is based on documented data collection and reporting; oral agreements do not satisfy the written record-keeping and reporting mandates of the regulation. Exam tip: For HMDA questions, remember its fundamental purpose: it is a data collection and reporting law. The most compliant answer is always to collect and report the required data according to the federal rule, not to seek shortcuts, exceptions, or undocumented alternatives.
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: Resolve the HMDA data collection and reporting issue with the state renewal 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.
Option C: 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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