During a disclosure desk review, the file reviewer encounters a Rate Lock Agreements issue. Which response should decide how the file should be documented?
Correct Answer
B) Use a corrected Closing Disclosure if the lock occurs after the CD
Why this is correct: If a borrower locks an interest rate after the initial Closing Disclosure (CD) has been issued, it constitutes a "changed circumstance" that likely alters the finance charges. TRID rules require the issuance of a corrected Closing Disclosure at least three business days before consummation (closing) to reflect the new, accurate terms based on the locked rate. Why the other choices are wrong: "Treat a float-down as automatic when the lock agreement does not provide it" is wrong because float-down options must be explicitly included in the lock agreement; they cannot be assumed or applied unilaterally. "Ignore the lock expiration because underwriting delay was internal" is wrong because the cause of the delay (internal or not) does not negate the expiration; an expired lock must be addressed, often requiring a new agreement and disclosures. "Charge a lock-extension fee without confirming who caused the delay and what was disclosed" is wrong because fees must be justified and disclosed; charging a fee without determining responsibility or providing proper notice is improper. Exam tip: The rule of thumb: any event that changes the loan terms after the CD is issued requires a corrected CD and a new 3-business-day waiting period before closing. A post-CD rate lock is a prime example.
Why This Is the Correct Answer
The correct response is "Use a corrected Closing Disclosure if the lock occurs after the CD" because Rate locks can require revised Loan Estimates and accurate interest-rate-dependent disclosures.
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 C: 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 D: 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
More Origination Questions
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