Changed circumstance

Key Takeaways

• A changed circumstance lets a lender re-issue the Loan Estimate and reset the fee tolerances the borrower is protected by.
• Regulation Z lists six reasons for a revision. New information about the settlement charges, a change the borrower asks for, and a rate lock that moves points are three of them.
• A revised Loan Estimate must go out within three business days of the lender learning the fact that justifies it.
• With no listed reason behind it, a charge above the disclosed amount goes back to the borrower within 60 days after consummation.

What It Means

A changed circumstance is the trigger that reopens a lender's price quote. When a lender delivers a Loan Estimate, most of the numbers on it are not marketing. They bind. Lender origination charges, and the fee for a service the borrower is not allowed to shop for, carry zero tolerance, meaning the amount charged at closing cannot exceed the amount that was disclosed. Recording fees and third-party services the borrower could shop for from the lender's written list sit in a second bucket, which may rise, but only by 10 percent in the aggregate.

Those baselines are set the moment the estimate goes out, and they stay set. A lender who decides later that the file turned out to be more work cannot simply raise the numbers. The only way the baseline moves is a recognized reason for revision under Regulation Z, and that list is where the phrase changed circumstance comes from. New or inaccurate information about the borrower or the property, a change the borrower asks for, a rate lock that shifts points, and an estimate the borrower sat on too long all qualify. Each one produces a fresh estimate, and the fresh estimate becomes the number the lender is held to on the Closing Disclosure.

How It Works in Washington

Washington stacks a state rule on top of the federal one, and real estate brokers should know it exists because their clients run into it. Under RCW 19.146.030, a Mortgage Broker or loan originator must give a borrower a full written disclosure itemizing all fees and costs within three business days of receiving a loan application. RCW 19.146.030(4) then limits what may change afterward: a fee that benefits the mortgage broker cannot exceed the disclosed amount unless the need to charge it was not reasonably foreseeable when the disclosure was provided, and unless the borrower receives a clear written explanation of the fee and the reason for it no less than three business days before the loan closing documents are signed.

That is the same idea as a changed circumstance, written in Washington's own words and running on its own clock. The federal rule counts three business days forward from the moment the lender learns the reason. The state rule counts three business days backward from signing. A fee surprise discovered the afternoon before a signing fails the state test even if the federal paperwork is clean. Brokers who want a closing to hold its date should walk clients through what to expect at a first closing and raise fee questions early rather than at the table.

Example

Marisol is buying a house in Everett for $565,000. Her Loan Estimate dated March 3 shows $1,900 in lender origination charges and $2,400 in third-party services she is allowed to shop for, including a $900 title fee. She locks her rate on March 20. The lock shifts her points, which is a listed reason for a revision, so the lender issues a revised Loan Estimate on March 21, inside the three business days Regulation Z allows.

On April 8 the title work turns up an easement nobody had found, and the title fee rises from $900 to $1,150. That $250 increase pushes the shoppable bucket from $2,400 to $2,650, which is 10.4 percent, past the 10 percent the bucket tolerates. New information about the property is a changed circumstance, so the lender revises again and the new $2,650 figure becomes the baseline. Now change one fact. If instead the lender had added $300 to its own $1,900 origination charge with no reason behind it, no revision would be available, that charge carries zero tolerance, and the lender would owe Marisol the $300 back no later than 60 days after consummation.

Common Mistakes and Exam Traps

• A changed circumstance resets the tolerance baseline. It does not remove the tolerance. The revised Loan Estimate becomes the new number the lender is held to.
• Zero tolerance and the 10 percent bucket are separate rules. Lender origination charges and services the borrower cannot shop for allow no increase at all, while recording fees and shoppable third-party services may rise 10 percent in the aggregate.
• Waiting too long is itself a listed reason for a revision. Regulation Z allows a new estimate once the borrower indicates an intent to proceed more than 10 business days after the estimate was provided.
• The Loan Estimate carries the tolerance baseline and the Closing Disclosure is where the comparison happens. A question about which document a lender revises to reset a fee is asking about the Loan Estimate.