A borrower-facing employee is unsure what to do when the consumer locks the interest rate after the initial disclosure package. What is the correct response?
Correct Answer
A) Send the revised Loan Estimate within three business days
Why this is correct: The correct action is prescribed by 12 CFR 1026.19(e)(3)(iv)(D). When a rate lock occurs after the initial Loan Estimate has been provided, and it changes the terms requiring a revision, a revised Loan Estimate must be sent to the borrower within three business days. This is a mandatory step to maintain compliance. Why the other choices are wrong: "Ignore the lock expiration because underwriting delay was internal" is wrong because internal delays do not nullify the redisclosure obligation triggered by the rate lock. "Charge a lock-extension fee without confirming who caused the delay and what was disclosed" is wrong because fees cannot be charged arbitrarily; moreover, this is not the primary required action for the rate lock event. "Use the new market rate but keep the old lock documentation unchanged" is wrong because it results in inaccurate disclosures, which is prohibited. Exam tip: For any action triggered by a rate lock, first ask: "Was the initial Loan Estimate already sent?" If yes, the clock starts for a revised estimate within 3 business days.
Why This Is the Correct Answer
The correct response is "Send the revised Loan Estimate within three business days" because Lines 198-203; 12 CFR 1026.19(e)(3)(iv)(D).
Why the Other Options Are Wrong
Option B: Ignore the lock expiration because underwriting delay was internal.
This choice is a tempting shortcut, but it conflicts with rate-lock documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Charge a lock-extension fee without confirming who caused the delay and what was disclosed.
This choice is a tempting shortcut, but it conflicts with rate-lock documentation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Use the new market rate but keep the old lock documentation unchanged.
This choice is not the best answer because it applies the wrong file step for rate-lock documentation; the governing rule is tested by the correct option.
Memory Technique
rate-lock agreements: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For rate-lock 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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