A mortgage team asks a quality-control reviewer about TILA RESPA Tolerance Rules during an NMLS filing review. Which answer should guide the file?
Correct Answer
B) Use a valid changed circumstance before increasing a fee
Why this is correct: The TILA-RESPA Integrated Disclosure (TRID) rule establishes tolerance categories (0%, 10%, unlimited) for closing costs. Fees can only be increased from the Loan Estimate if a valid "changed circumstance" (e.g., changed borrower information, new information affecting settlement charges) occurs, allowing a revised estimate. The correct answer, "Use a valid changed circumstance before increasing a fee," directly follows this rule, ensuring any fee increase is legally justified. Why the other choices are wrong: "Cure a tolerance problem by renaming the fee instead of documenting or refunding the variance" is wrong because renaming a fee does not cure a tolerance violation; the cure requires a refund to the borrower or documenting a valid reason for the increase. "Move the fee to a different category to avoid a tolerance cure" is wrong because fee categorization is based on the nature of the fee, not choice, and moving it to circumvent tolerance rules is prohibited. "Resolve the TILA RESPA Tolerance Rules issue with the income calculation exception that does not fit the facts" is wrong because applying an irrelevant exception (like one for income calculations) does not resolve a fee tolerance issue and is non-compliant. Exam tip: Remember the three tolerance buckets: zero tolerance (e.g., lender charges), 10% tolerance (e.g., recording fees), and unlimited tolerance (e.g., prepaid interest). A valid changed circumstance is the key to increasing a fee.
Why This Is the Correct Answer
The correct response is "Use a valid changed circumstance before increasing a fee" because TRID fee disclosures and tolerance categories govern estimates, revisions, and closing-cost comparison.
Why the Other Options Are Wrong
Option A: 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: Resolve the TILA RESPA Tolerance Rules issue with the income calculation exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
TILA RESPA Tolerance Rules: 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?
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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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