During a borrower intake review, the branch manager encounters a TILA HPML Escrow Requirements issue. Which response should explain the required action to the team?
Correct Answer
A) Compare APR to APOR as of the rate-set date
Why this is correct: TILA's High-Priced Mortgage Loan (HPML) rules impose additional requirements (like escrows) on certain loans. Coverage is determined by comparing the loan's Annual Percentage Rate (APR) to the Average Prime Offer Rate (APOR) index. The governing concept is that this comparison must be made as of the date the interest rate is set (the rate-set date) to accurately determine if the loan is an HPML. The correct action is to perform this specific comparison. Why the other choices are wrong: "Assume the TILA HPML Escrow Requirements condition is met because the borrower satisfied the separate closing disclosure requirement" is wrong because receiving a Closing Disclosure does not automatically satisfy the separate, numerical test for HPML coverage (APR vs. APOR). "Wait until a regulator asks for the file before applying the federal requirement" is wrong because HPML determination and any resulting requirements (like establishing an escrow) must be applied at or before closing, not delayed. "Rely on oral agreement when the rule requires documented compliance" is wrong because HPML status and escrow setup are based on calculated numbers and legal requirements, not oral agreements. Exam tip: For HPML questions, the trigger is always the APR exceeding APOR by a specific margin. Know that the rate-set date is the key date for this comparison.
Why This Is the Correct Answer
The correct response is "Compare APR to APOR as of the rate-set date" because HPML coverage depends on APR-over-APOR thresholds and carries escrow or appraisal duties.
Why the Other Options Are Wrong
Option B: Assume the TILA HPML Escrow Requirements condition is met because the borrower satisfied the separate closing disclosure requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: 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
HPML requirements: 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 HPML requirements; 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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