A 45-day lock at 6.375% expires Friday. The file will not close until the following Wednesday, and the market rate is now 6.875%. If the lender offers a lock extension that the borrower wishes to accept, what is the appropriate approach before the existing lock expires?
Correct Answer
A) Confirm the agreed extension, explain any fee, and provide applicable updated disclosures
A. Confirm the offered extension and handle its cost and disclosures transparently. The borrower wants to accept an available extension, so confirm its rate, duration and cost before relying on it. The extension is not automatically free, and it does not make an unfinished loan ready for closing. Scope and exceptions: Extension availability and pricing depend on the agreement and lender policy. The appropriate revised disclosure depends on the transaction stage; do not issue a new Loan Estimate after the Closing Disclosure. Source: Rate-lock timing, extension costs and lender policy — https://www.consumerfinance.gov/ask-cfpb/whats-a-lock-in-or-a-rate-lock-en-143/ 1026.19(e)(4)(ii) — https://www.consumerfinance.gov/rules-policy/regulations/1026/19/
Why This Is the Correct Answer
A. Confirm the offered extension and handle its cost and disclosures transparently. The borrower wants to accept an available extension, so confirm its rate, duration and cost before relying on it. The extension is not automatically free, and it does not make an unfinished loan ready for closing. Scope and exceptions: Extension availability and pricing depend on the agreement and lender policy. The appropriate revised disclosure depends on the transaction stage; do not issue a new Loan Estimate after the Closing Disclosure.
Why the Other Options Are Wrong
Option B: Extend it quietly at no charge, as an expired lock is the lender's risk
It assumes a free extension without support.
Option C: Close Friday on the unfinished file and correct the papers afterwards
A rate deadline is not a reason to close an incomplete file.
Option D: Let it expire and close at 6.875%, since the borrower missed the date
It ignores the offered extension the borrower wishes to accept.
Exam Tip
Confirm the agreement first; then apply the correct disclosure process.
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