In a pricing desk question, the MLO sees facts tied to TILA APR Finance Charge. What should the file reflect?
Correct Answer
D) Use the Regulation Z disclosure rule before closing
Why this is correct: The Truth in Lending Act (TILA), implemented by Regulation Z, mandates specific disclosures for closed-end credit, including the Finance Charge and the Annual Percentage Rate (APR). These disclosures must be provided to the consumer a specific number of days before consummation (closing) to allow for review. The correct answer, "Use the Regulation Z disclosure rule before closing," correctly identifies that the file must reflect compliance with these mandatory pre-closing disclosure timing and content rules. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal policies cannot override federal law. "Use prior branch licensing approval as a substitute for the current TILA APR Finance Charge requirement" is incorrect because licensing is separate from disclosure compliance for each transaction. "Rely on oral agreement when the rule requires documented compliance" is non-compliant, as TILA disclosures must be in writing. Exam tip: TILA's core purpose is disclosure. When you see "APR" or "Finance Charge," think "Regulation Z" and "disclosure 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: Use prior branch licensing approval as a substitute for the current TILA APR Finance Charge 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: 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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