An MLO is reviewing procedures for a case where a valid changed circumstance raises a fee before the Closing Disclosure has been issued. What is the proper handling?
Correct Answer
A) Issue a revised Loan Estimate within three business days
Why this is correct: The rule under Regulation Z (12 CFR 1026.19(e)(3)(iv) and (e)(4)(i)) is clear: a valid changed circumstance that increases a fee before the Closing Disclosure is issued allows for a revised Loan Estimate. This revised Loan Estimate must be issued within three business days after the creditor receives information sufficient to establish the changed circumstance. Why the other choices are wrong: "Increase disclosed costs based on an internal pricing preference without file-specific support" is wrong because fee increases must be supported by a valid, file-specific changed circumstance, not by internal business preferences. "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 competitive repricing; it is only permitted when a bona fide changed circumstance occurs. "Treat the Revised Loan Estimate changed circumstance review as complete because the file contains a related secondary-market delivery note" is wrong because secondary-market delivery notes do not substitute for the requirement to issue a revised Loan Estimate within three business days after the changed circumstance is known. Exam tip: The three-business-day clock starts when the creditor has 'sufficient information,' not when the final decision is made or secondary documents are prepared.
Why This Is the Correct Answer
The correct response is "Issue a revised Loan Estimate within three business days". A valid changed circumstance permits a revised Loan Estimate, but the timing window is still three business days after sufficient information is received.
Why the Other Options Are Wrong
Option B: 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 C: 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 D: Treat the Revised Loan Estimate changed circumstance review as complete because the file contains a related secondary-market delivery note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
Changed circumstance questions usually test both the reason and the timing.
Exam Tip
For changed-circumstance documentation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Do not assume every cost increase is barred; the issue is whether a valid changed circumstance supports redisclosure.
More Origination Questions
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