An MLO is reviewing procedures for a case where a late closing change occurs and the team must decide whether a new waiting period is required. What is the proper handling?
Correct Answer
C) Restart the wait only for APR, product, or prepayment penalty changes
Why this is correct: The governing rule is 12 CFR 1026.19(f)(2)(ii), which mandates a new three-business-day waiting period only when a Corrected Closing Disclosure is issued due to a change in the Annual Percentage Rate (APR), the loan product (e.g., from fixed to adjustable), or the addition of a prepayment penalty. The scenario describes a 'late closing change,' and this rule precisely defines which changes trigger the waiting period restart. Why the other choices are wrong: 'Move the fee to a different category to avoid a tolerance cure' is wrong because fee re-categorization to avoid tolerance violations is prohibited. 'Increase a zero-tolerance charge because the borrower accepted the cost verbally' is wrong because zero-tolerance fees cannot increase for any reason, and verbal acceptance is insufficient. 'Wait until closing to disclose a known lender-required fee' is wrong because known fees must be disclosed in good faith on the Loan Estimate and Closing Disclosure; delaying disclosure is non-compliant. Exam tip: Remember the three specific triggers for a new waiting period: APR, product, or prepayment penalty. No other changes, even significant ones, restart this clock.
Why This Is the Correct Answer
The correct response is "Restart the wait only for APR, product, or prepayment penalty changes". Only the specified APR, product, or prepayment penalty changes trigger the new three business day waiting period.
Why the Other Options Are Wrong
Option A: Move the fee to a different category to avoid a tolerance cure.
This choice is not the best answer because it applies the wrong file step for fee disclosure and tolerance treatment; the governing rule is tested by the correct option.
Option B: Increase a zero-tolerance charge because the borrower accepted the cost verbally.
This choice is a tempting shortcut, but it conflicts with fee disclosure and tolerance treatment because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Wait until closing to disclose a known lender-required fee.
This choice is not the best answer because it applies the wrong file step for fee disclosure and tolerance treatment; the governing rule is tested by the correct option.
Memory Technique
Memorize the three restart triggers: APR, product, prepayment penalty.
Exam Tip
For fee disclosure and tolerance treatment questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Not every corrected Closing Disclosure creates a fresh waiting period.
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