A compliance review finds that the consumer locks the interest rate after the initial disclosure package. What should the MLO do next?
Correct Answer
D) Send the revised Loan Estimate within three business days
Why this is correct: The governing rule, 12 CFR 1026.19(e)(3)(iv)(D), states that if an interest rate is locked after the initial Loan Estimate is provided, and this changes points or lender credits, a revised Loan Estimate must be sent to the consumer within three business days. This ensures the consumer receives accurate, timely disclosures reflecting the locked terms. Why the other choices are wrong: Treating a float-down as automatic when the lock agreement does not provide it misrepresents the contract terms. Ignoring the lock expiration because underwriting delay was internal fails to address a material change that requires disclosure and possibly a fee. Charging a lock-extension fee without confirming who caused the delay and what was disclosed may violate rules on permissible fees and proper disclosure. Exam tip: A post-disclosure rate lock is a triggering event for a revised Loan Estimate. Remember the three-business-day deadline.
Why This Is the Correct Answer
The correct response is "Send the revised Loan Estimate within three business days" because Lines 198-203; 12 CFR 1026.19(e)(3)(iv)(D).
Why the Other Options Are Wrong
Option A: Treat a float-down as automatic when the lock agreement does not provide it.
This choice is not the best answer because it applies the wrong file step for rate-lock documentation; the governing rule is tested by the correct option.
Option B: Ignore the lock expiration because underwriting delay was internal.
This choice is a tempting shortcut, but it conflicts with rate-lock documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Charge a lock-extension fee without confirming who caused the delay and what was disclosed.
This choice is a tempting shortcut, but it conflicts with rate-lock documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
rate-lock agreements: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For rate-lock 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
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