Under TRID, a revised Loan Estimate (LE) can be issued if there is a changed circumstance that affects the loan terms or costs. This can include situations such as a natural disaster in the area where the loan will close, which may impact the value of the property or loan costs. Such changes are considered beyond the control of the parties involved and justify a revised estimate.

Market fluctuations (A) on a locked loan and borrower salary increases (B) are not valid reasons for issuing a revised LE.

Changes that the MLO should have known at the time of the original LE (D) do not qualify as a valid changed circumstance.

Redlining is an illegal discriminatory practice where lenders refuse to offer credit or offer less favorable terms to residents of certain neighborhoods, often based on race, ethnicity, or national origin.

“Redlining is an illegal practice in which lenders refuse to make loans or provide other services to people in certain neighborhoods based on their race or ethnicity.”

— CFPB, Fair Lending Glossary; Equal Credit Opportunity Act (ECOA)

An assumable loan is a loan in which a purchaser of a property has the option to take over the existing loan payments under the same terms as the original borrower. This can happen with certain types of loans, such as FHA or VA loans, which allow the buyer to assume the mortgage, potentially at a more favorable interest rate than current market rates.

Options like taking out a second mortgage (A), choosing a loan servicer (B), or selling the loan (D) do not describe assumable loans.

Under the TILA-RESPA Integrated Disclosure (TRID) rules, any significant change to the Annual Percentage Rate (APR) beyond the allowed tolerance before closing requires the lender to provide a revised Closing Disclosure (CD). If the APR increases by more than 0.125% for fixed-rate loans, the lender must re-disclose the CD and provide the borrower with at least three business days to review the updated terms before consummation (closing).

In this case, the interest rate increase from 3.250% to 3.875% is a significant change that impacts the APR, triggering the need for re-disclosure and the mandatory three-business-day waiting period.

The lender must postpone the closing until the new three-day waiting period passes to ensure compliance with TRID regulations.

Under the Equal Credit Opportunity Act (ECOA), the term adverse action is defined as a refusal to grant credit based on the requested loan terms, an unfavorable change in loan terms, or a termination of an account/application. This can include:

Denying a credit application.

Offering credit on terms different from those requested.

Closing an existing credit account.

Lenders must provide a formal notice of adverse action, explaining the reasons for the denial or change in terms, to comply with ECOA’s requirements for transparency and fairness.

Other options:

Account closure (B) and credit closure (C) are not specific ECOA terms.

Denial of credit (D) is a form of adverse action but does not cover all situations like a change in loan terms.

An origination charge is considered a finance charge under TILA/Regulation Z and must be included in the calculation of the loan’s APR. Most third-party fees (such as credit report, recording, and transfer taxes) are not considered finance charges if they are bona fide and reasonable.

“Finance charges include all charges payable directly or indirectly by the consumer and imposed as a condition of or an incident to the extension of credit, including origination fees.”

— 12 CFR § 1026.4(a); Regulation Z

Under RESPA (Real Estate Settlement Procedures Act), settlement services include activities related to closing the mortgage loan, such as title company services and escrow agent services. These services are integral to the settlement process and ensure that the transaction is completed legally and correctly.

Flood insurance (A) is required for properties in flood zones but is not considered a settlement service.

Homeowners association fees (B) and the sale of the mortgage loan on the secondary market (D) are also not part of the settlement services.