On May 14, two calendar days before planned May 16 consummation of a covered non-timeshare mortgage, an investor adds a lawful prepayment penalty absent from the prior Closing Disclosure. No valid emergency waiting-period waiver applies. What correction and waiting period are required?
Correct Answer
B) Ensure receipt of a corrected Closing Disclosure at least three business days before consummation and delay closing as necessary
B. Adding the penalty independently requires corrected disclosure and a new waiting period. This is a specified restart event even if the payment and APR do not change. The relevant event is consumer receipt of the corrected disclosure, not the investor's instruction or mere preparation of the form. Scope and exceptions: The question assumes the penalty itself is lawful; redisclosure cannot legalize a prohibited term. Removing a penalty alone requires correction but does not trigger this restart. Exact rescheduling depends on receipt and the applicable business-day count. Source: Section 1026.19(f)(2)(ii)(C); comment 19(f)(2)(ii)-1.iii — https://www.consumerfinance.gov/rules-policy/regulations/1026/19/
Why This Is the Correct Answer
B. Adding the penalty independently requires corrected disclosure and a new waiting period. This is a specified restart event even if the payment and APR do not change. The relevant event is consumer receipt of the corrected disclosure, not the investor's instruction or mere preparation of the form. Scope and exceptions: The question assumes the penalty itself is lawful; redisclosure cannot legalize a prohibited term. Removing a penalty alone requires correction but does not trigger this restart. Exact rescheduling depends on receipt and the applicable business-day count.
Why the Other Options Are Wrong
Option A: A new 3-business-day period runs only if the penalty exceeds 2% of the balance
The restart rule has no 2% penalty threshold.
Option C: Nothing is required until the borrower actually prepays the loan early
Disclosure cannot wait until prepayment occurs.
Option D: A corrected disclosure at consummation is enough, as the payment is unchanged
An unchanged payment does not remove this trigger.
Exam Tip
Separate penalty legality from disclosure timing.
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