In a closing-readiness check, the branch manager sees facts tied to HOEPA Points and Fees. What should the file reflect?
Correct Answer
D) Apply high-cost mortgage restrictions before consummation
Why this is correct: The Home Ownership and Equity Protection Act (HOEPA) imposes special restrictions and disclosures on certain high-cost mortgages. These rules are triggered by specific thresholds for the APR, points and fees, or prepayment penalties. Once triggered, the lender must provide specific disclosures and comply with restrictions (like bans on certain loan terms) *before* the loan is consummated. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because HOEPA's requirements are federal law and cannot be overridden by internal policy. "Apply the advertising disclosure timing rule even though the file is testing HOEPA Points and Fees" is wrong because advertising rules (like those in Regulation Z) are a separate compliance area and do not address HOEPA's pre-consummation restrictions. "Rely on oral agreement when the rule requires documented compliance" is wrong because HOEPA mandates specific written disclosures and counseling; oral agreements are insufficient. Exam tip: HOEPA rules are triggered by numerical thresholds and must be applied *before* the loan closes. Look for options emphasizing pre-consummation action.
Why This Is the Correct Answer
The correct response is "Apply high-cost mortgage restrictions before consummation" because HOEPA/high-cost mortgage rules use rate, points-and-fees, and prepayment-penalty triggers and restrict risky terms.
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: Apply the advertising disclosure timing rule even though the file is testing HOEPA Points and Fees.
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
HOEPA high-cost mortgage 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 HOEPA high-cost mortgage 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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