In a training scenario, a valid changed circumstance raises a fee before the Closing Disclosure has been issued. What action best follows the rule?
Correct Answer
D) Issue a revised Loan Estimate within three business days
Why this is correct: The rule from 12 CFR 1026.19(e)(3)(iv) and (e)(4)(i) states that when a valid changed circumstance (like a fee increase) occurs before the Closing Disclosure is issued, the creditor must provide a revised Loan Estimate. This revised disclosure must be issued within three business days after the creditor receives information sufficient to establish the changed circumstance. Why the other choices are wrong: "Use prior rate-lock approval as a substitute for the current Revised Loan Estimate changed circumstance requirement" is wrong because a prior rate lock does not substitute for the requirement to issue a revised Loan Estimate when a new, valid changed circumstance arises. "Use the revised Loan Estimate only to improve pricing after the borrower shops a competitor" is wrong because a revised Loan Estimate cannot be used for competitive repricing; it is only permitted when a legitimate changed circumstance occurs. "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 disclosed cost; a routine underwriting condition that doesn't affect a charge does not qualify. Exam tip: The revised Loan Estimate is a reactive tool for specific events, not a proactive tool for price adjustments.
Why This Is the Correct Answer
The correct response is "Issue a revised Loan Estimate within three business days" because Lines 198-203; 12 CFR 1026.19(e)(3)(iv) and 1026.19(e)(4)(i).
Why the Other Options Are Wrong
Option A: Use prior rate-lock approval as a substitute for the current Revised Loan Estimate changed circumstance requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Use the revised Loan Estimate only to improve pricing after the borrower shops a competitor.
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.
Option C: 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.
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
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A construction-to-permanent note states that conversion requires completion, a certificate of occupancy, and no unresolved liens. Construction is finished, but a mechanic's lien remains. What should happen?