A borrower-facing employee is unsure what to do when a valid changed circumstance raises a fee before the Closing Disclosure has been issued. What is the correct response?
Correct Answer
C) Issue a revised Loan Estimate within three business days
Why this is correct: The governing rule, 12 CFR 1026.19(e)(3)(iv) and (e)(4)(i), requires that when a valid changed circumstance increases a fee before the Closing Disclosure is issued, the creditor must provide a revised Loan Estimate. This revised disclosure must be issued within three business days after the creditor receives information sufficient to establish the changed circumstance. Why the other choices are wrong: "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 strategic repricing; it is only permitted when a legitimate changed circumstance occurs. "Treat every underwriting condition as a changed circumstance even when it does not affect the charge" is wrong because a changed circumstance must cause an increase in a specific charge; a routine underwriting condition that doesn't affect costs does not qualify. "Redisclose only after consummation because the file already has a Closing Disclosure" is wrong because the scenario states the fee increase happens *before* the Closing Disclosure is issued, so the correct action is a revised Loan Estimate, not post-consummation redisclosure. Exam tip: The key phrase 'before the Closing Disclosure has been issued' tells you the correct disclosure tool is the revised Loan Estimate, not a Closing Disclosure correction.
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: 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 B: Treat every underwriting condition as a changed circumstance even when it does not affect the charge.
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 D: 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.
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
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