A processor handoff raises a TILA Changed Circumstances question for the MLO. What answer should guide the file?
Correct Answer
A) Do not revise estimates without a valid trigger
Why this is correct: Under TILA-RESPA rules, a Loan Estimate's estimated costs are binding in good faith. The correct choice, "Do not revise estimates without a valid trigger," upholds this principle. Revised estimates (leading to a revised Loan Estimate) are only permitted if a "changed circumstance" as defined by Regulation Z occurs, such as a change in the borrower's eligibility, a revision in settlement services chosen, or new information affecting property value. Why the other choices are wrong: "Treat a rate lock as a changed circumstance for unrelated settlement fees" is wrong because a rate lock, by itself, is not a valid changed circumstance that permits increasing other estimated costs (like title fees). The valid reasons are specific and limited. "Ignore redisclosure timing because the borrower verbally accepted the new terms" is wrong because Regulation Z has strict timing rules for providing revised disclosures (e.g., within 3 business days of learning of a valid changed circumstance). Verbal acceptance does not waive these legal requirements. "Increase disclosed costs based on an internal pricing preference without file-specific support" is wrong because estimates cannot be increased arbitrarily. Any increase must be supported by a bona fide, file-specific reason that qualifies as a valid changed circumstance or other permissible reason. Exam tip: Changed circumstances are the *only* valid triggers for increasing certain costs on a revised Loan Estimate. Memorize the short list: borrower information, property, settlement service, and extraordinary circumstances.
Why This Is the Correct Answer
The correct response is "Do not revise estimates without a valid trigger" because Changed circumstances can permit revised estimates only when Regulation Z conditions and timing are met.
Why the Other Options Are Wrong
Option B: 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 C: 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.
Option D: 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.
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?
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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A lock is extended and the rate moves up an eighth. Payroll applies the compensation grid to the new rate, raising the originator’s commission by $180. A quality-control reviewer flags the payment. Why?
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