A quality-control reviewer flags a case because a cost changes after the Closing Disclosure has already been provided. What correction is appropriate?
Correct Answer
D) Use a corrected Closing Disclosure instead of a revised Loan Estimate
Why this is correct: The core rule from Regulation Z (the governing federal rule is that after the initial Closing Disclosure has been provided, the method to correct a cost change is to issue a corrected Closing Disclosure under the governing federal rule The revised Loan Estimate is used earlier in the process, before the Closing Disclosure is issued. Therefore, the proper correction is to use a corrected Closing Disclosure. Why the other choices are wrong: "Increase disclosed costs based on an internal pricing preference without file-specific support" is wrong because cost increases generally require a valid justification (like a changed circumstance) and proper disclosure; an internal preference is not sufficient. "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 post-Closing Disclosure corrections, and using it to "improve pricing" based on shopping may violate good faith estimate rules. "Treat every underwriting condition as a changed circumstance even when it does not affect the charge" is wrong because a changed circumstance must be specific, bona fide, and actually affect a particular charge; blanket treatment is not permitted. Exam tip: For post-Closing Disclosure changes, think "corrected CD." The Loan Estimate revision period is over.
Why This Is the Correct Answer
The correct response is "Use a corrected Closing Disclosure instead of a revised Loan Estimate". Once the Closing Disclosure has been provided, the cure path is through corrected Closing Disclosure rules, not a new revised Loan Estimate.
Why the Other Options Are Wrong
Option A: Increase disclosed costs based on an internal pricing preference without file-specific support.
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 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
After the Closing Disclosure appears in the fact pattern, think corrected CD.
Exam Tip
For changed-circumstance documentation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Students sometimes keep using revised Loan Estimates too late in the process.
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?
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?
A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
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