During a disclosure desk review, the MLO encounters a TILA HELOC Disclosures issue. Which response should match the file facts to the correct rule?
Correct Answer
D) Use the principal-dwelling security interest to analyze rescission
Why this is correct: The original explanation notes HELOCs are open-end credit plans secured by a dwelling with special disclosures and rescission rules when secured by a principal dwelling. The governing TILA concept is that a right of rescission generally applies for three business days when a security interest is taken in the borrower's principal dwelling. Therefore, to resolve a TILA HELOC Disclosures issue, one must use the principal-dwelling security interest to analyze rescission applicability. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because HELOC disclosure rules are specific to open-end credit under TILA. "Resolve the TILA HELOC Disclosures issue with the appraisal review exception that does not fit the facts" is wrong because appraisal reviews are unrelated to HELOC disclosure requirements. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because HELOC disclosures (like the HELOC agreement) differ from those for closed-end loans. Exam tip: For HELOCs, remember 'principal dwelling' triggers rescission; investment properties or second homes do not.
Why This Is the Correct Answer
The correct response is "Use the principal-dwelling security interest to analyze rescission" because HELOCs are open-end credit plans secured by a dwelling with special disclosures and rescission rules when secured by a principal dwelling.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option B: Resolve the TILA HELOC Disclosures issue with the appraisal review 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: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
HELOC and open-end credit 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 HELOC and open-end credit 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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