During intake, a valid changed circumstance raises a fee before the Closing Disclosure has been issued. What is the best compliant response?
Correct Answer
A) Issue a revised Loan Estimate within three business days
Why this is correct: The governing concept is that Regulation Z (12 CFR 1026.19(e)(3)(iv) and (e)(4)(i)) permits a creditor to issue a revised Loan Estimate after a valid changed circumstance occurs, such as a fee increase. The key procedural rule is that this revised disclosure must be provided to the borrower within three business days after the creditor receives information sufficient to establish that the changed circumstance has occurred. This timing requirement applies even before a Closing Disclosure is issued. Why the other choices are wrong: "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 arbitrarily to reset fee tolerances. "Treat a rate lock as a changed circumstance for unrelated settlement fees" is wrong because a rate lock itself is not a valid changed circumstance that justifies increasing unrelated fees. "Ignore redisclosure timing because the borrower verbally accepted the new terms" is wrong because verbal acceptance does not waive the mandatory three-business-day redisclosure timing requirement under the TILA-RESPA Integrated Disclosure rules. Exam tip: Remember the sequence: valid changed circumstance → then a revised Loan Estimate must be issued within 3 business days of learning about it. The timing is strict and not waived by borrower consent.
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 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.
Option D: 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.
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
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