A borrower-facing employee is unsure what to do when a late closing change occurs and the team must decide whether a new waiting period is required. What is the correct response?
Correct Answer
A) Restart the wait only for APR, product, or prepayment penalty changes
Why this is correct: The governing regulation, 12 CFR 1026.19(f)(2)(ii), establishes that a new three-business-day waiting period is required only when certain fundamental loan terms change after the initial Closing Disclosure is provided. These terms are the Annual Percentage Rate (APR), the loan product (e.g., moving from a conventional to an FHA loan), or the addition of a prepayment penalty feature. The correct, compliant response is to "Restart the wait only for APR, product, or prepayment penalty changes." Why the other choices are wrong: "Cure a tolerance problem by renaming the fee instead of documenting or refunding the variance" is wrong because a tolerance violation must be cured by the creditor documenting the reason for the variance and refunding any excess amount to the borrower; simply renaming the fee is deceptive and non-compliant. "Move the fee to a different category to avoid a tolerance cure" is wrong because fees must be disclosed in their accurate category (e.g., services the borrower can shop for vs. services they cannot); moving them is a manipulation that violates disclosure rules. "Increase a zero-tolerance charge because the borrower accepted the cost verbally" is wrong because zero-tolerance charges are prohibited from increasing at all, and verbal acceptance is not a valid waiver of this protection. Exam tip: Remember, the cure for a tolerance violation is a refund or creditor absorption, not creative accounting or renaming.
Why This Is the Correct Answer
The correct response is "Restart the wait only for APR, product, or prepayment penalty changes" because Lines 205-206; 12 CFR 1026.19(f)(2)(ii).
Why the Other Options Are Wrong
Option B: Cure a tolerance problem by renaming the fee instead of documenting or refunding the variance.
This choice is a tempting shortcut, but it conflicts with fee disclosure and tolerance treatment because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Move the fee to a different category to avoid a tolerance cure.
This choice is not the best answer because it applies the wrong file step for fee disclosure and tolerance treatment; the governing rule is tested by the correct option.
Option D: Increase a zero-tolerance charge because the borrower accepted the cost verbally.
This choice is a tempting shortcut, but it conflicts with fee disclosure and tolerance treatment because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Memory Technique
Corrected Closing Disclosure new waiting period: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For fee disclosure and tolerance treatment 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?
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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