A compliance review finds that a valid changed circumstance raises a fee before the Closing Disclosure has been issued. What should the MLO do next?
Correct Answer
B) Issue a revised Loan Estimate within three business days
Why this is correct: The governing concept is the TILA-RESPA Integrated Disclosure (TRID) rule for a valid changed circumstance before the Closing Disclosure is issued. Under 12 CFR 1026.19(e)(3)(iv) and (e)(4)(i), a creditor may issue a revised Loan Estimate if a valid changed circumstance occurs, but it must be provided to the consumer no later than three business days after the creditor receives information sufficient to conclude that the changed circumstance has occurred. The question states a valid changed circumstance raises a fee before the Closing Disclosure has been issued, so the required action is to issue a revised Loan Estimate within that three-business-day window. Why the other choices are wrong: "Use prior loan estimate approval as a substitute for the current Revised Loan Estimate changed circumstance requirement" is wrong because a prior approval does not waive the requirement to issue a revised Loan Estimate when a valid changed circumstance occurs. "Treat a rate lock as a changed circumstance for unrelated settlement fees" is wrong because a rate lock is not a valid changed circumstance for fees unrelated to the rate lock itself. "Ignore redisclosure timing because the borrower verbally accepted the new terms" is wrong because verbal acceptance does not override the mandatory timing requirements for providing revised disclosures. Exam tip: Remember the key trigger: before Closing Disclosure = revised Loan Estimate within 3 business days of learning of the change.
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 loan estimate 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 C: Treat a rate lock as a changed circumstance for unrelated settlement fees.
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 D: Ignore redisclosure timing because the borrower verbally accepted the new terms.
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?
Between the Loan Estimate and closing, prepaid interest increases $180, homeowner insurance increases $95, transfer taxes increase $40, and a credit report fee for which the consumer could not shop increases $12. There is no valid revised estimate or other exception. Which increases violate TRID's zero-tolerance 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?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
A construction-to-permanent loan will convert to a substantially higher fully amortizing payment. Which payment is especially important when assessing the borrower's long-term repayment capacity?
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?
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