A file review raises a question about TILA right of rescission. Which action should the state compliance officer recommend?
Correct Answer
D) Give each consumer with an ownership interest rescission rights
Why this is correct: TILA's right of rescission applies to certain refinances and home-equity loans secured by the consumer's principal dwelling. The right must be given to each consumer who has an ownership interest in the property, even if they are not primarily liable on the note. The correct answer, "Give each consumer with an ownership interest rescission rights," accurately states this requirement. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because rescission rights are a statutory TILA protection that cannot be waived by internal policy. "Delay the TILA Right of Rescission step until a later advertising disclosure review instead of acting now" is wrong because rescission rights and disclosures must be provided at the proper time in the transaction, typically at closing. "Rely on oral agreement when the rule requires documented compliance" is wrong because the right of rescission must be provided in a written notice. Exam tip: Remember that the right of rescission generally does NOT apply to purchase-money mortgages, only to refinances and home-equity loans on a principal dwelling. The rescission period is typically three business days after closing.
Why This Is the Correct Answer
The correct response is "Give each consumer with an ownership interest rescission rights" 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: Delay the TILA Right of Rescission step until a later advertising disclosure 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.
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 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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