In a closing-readiness check, a compliance analyst sees facts tied to TILA APR Tolerance. What should the file reflect?
Correct Answer
D) Use the Regulation Z disclosure rule before closing
Why this is correct: TILA (Truth in Lending Act) and its implementing Regulation Z mandate accurate disclosure of the Annual Percentage Rate (APR) and finance charge. The APR has specific tolerances for accuracy; if it is outside the allowed tolerance, a corrected disclosure must be provided to the borrower before closing. Therefore, the file must reflect that the Regulation Z disclosure rule was properly applied to ensure APR accuracy prior to consummation. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" violates TILA, as federal rules are not optional. "Treat the TILA APR Tolerance review as complete because the file contains a related licensing note" is wrong because a licensing note does not satisfy the specific disclosure and accuracy requirements of Regulation Z. "Rely on oral agreement when the rule requires documented compliance" is incorrect because TILA disclosures must be in writing. Exam tip: For TILA APR issues, remember the core rule: accurate disclosures under Regulation Z must be provided to the borrower before closing.
Why This Is the Correct Answer
The correct response is "Use the Regulation Z disclosure rule before closing" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
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: Treat the TILA APR Tolerance review as complete because the file contains a related licensing note.
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
TILA APR and finance-charge 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 TILA APR and finance-charge 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
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