A compliance review finds that a cost changes after the Closing Disclosure has already been provided. What should the MLO do next?
Correct Answer
D) Use a corrected Closing Disclosure instead of a revised Loan Estimate
Why this is correct: Under Regulation Z (12 CFR 1026.19(e)(4)(ii) and 1026.19(f)(2)), the correct procedure after providing the Closing Disclosure is to use a corrected Closing Disclosure for any subsequent changes, not a revised Loan Estimate. The revised Loan Estimate cutoff has passed. Why the other choices are wrong: "Treat every underwriting condition as a changed circumstance even when it does not affect the charge" is wrong because a changed circumstance must actually cause an increase in a specific charge; a blanket rule misapplies the standard. "Apply the PMI cancellation timing rule even though the file is testing Closing Disclosure after revised Loan Estimate cutoff" is wrong because PMI cancellation rules are irrelevant to the disclosure correction method required here. "Use a revised disclosure to reset tolerances without a documented event" is wrong because a revised disclosure requires a valid changed circumstance; you cannot use it to arbitrarily reset tolerances. Exam tip: Focus on the trigger event: 'Closing Disclosure has already been provided' immediately points to corrected Closing Disclosure.
Why This Is the Correct Answer
The correct response is "Use a corrected Closing Disclosure instead of a revised Loan Estimate" because Lines 198-206; 12 CFR 1026.19(e)(4)(ii) and 1026.19(f)(2).
Why the Other Options Are Wrong
Option A: Treat every underwriting condition as a changed circumstance even when it does not affect the charge.
This choice is not the best answer because it applies the wrong file step for changed-circumstance documentation; the governing rule is tested by the correct option.
Option B: Apply the PMI cancellation timing rule even though the file is testing Closing Disclosure after revised Loan Estimate cutoff.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Use a revised disclosure to reset tolerances without a documented event.
This choice is a tempting shortcut, but it conflicts with changed-circumstance documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
changed-circumstance review: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For changed-circumstance documentation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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
More Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
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A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
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