In a mortgage origination file, a valid changed circumstance raises a fee before the Closing Disclosure has been issued. Which action should be taken?
Correct Answer
D) Issue a revised Loan Estimate within three business days
Why this is correct: Per 12 CFR 1026.19(e)(3)(iv) and (e)(4)(i), a valid changed circumstance that raises a fee before the Closing Disclosure is issued permits the creditor to issue a revised Loan Estimate. The creditor must provide this revised Loan Estimate within three business days after receiving information sufficient to establish the changed circumstance. Why the other choices are wrong: "Redisclose only after consummation because the file already has a Closing Disclosure" is wrong because the stem specifies the event occurs *before* the Closing Disclosure is issued, so a revised Loan Estimate is required, not a post-consummation correction. "Use a revised disclosure to reset tolerances without a documented event" is wrong because a revised disclosure requires a valid, documented changed circumstance; it cannot be used to arbitrarily reset fee tolerances. "Treat a rate lock as a changed circumstance for unrelated settlement fees" is wrong because a rate lock is not a valid changed circumstance for increasing fees that are not directly related to the lock. Exam tip: Always note the disclosure stage: pre-Closing Disclosure events typically require a revised Loan Estimate; post-Closing Disclosure events may require a corrected Closing Disclosure.
Why This Is the Correct Answer
The correct response is "Issue a revised Loan Estimate within three business days" because Lines 198-203; 12 CFR 1026.19(e)(3)(iv) and 1026.19(e)(4)(i).
Why the Other Options Are Wrong
Option A: Redisclose only after consummation because the file already has a Closing Disclosure.
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 a revised disclosure to reset tolerances without a documented event.
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 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.
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?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During a borrower intake review, the branch manager encounters an RESPA Referral Prohibitions issue. Which response should confirm the rule-based response?
Next Question
A manager proposes settling a borrower complaint by cutting the originator’s commission on that file and adding the same amount to her next three files, which are all priced above par. What should the response be?