Would a changed circumstance be when your loan amount is less than what it should have been because your loan officer doesn't know how to calculate 80% of the appraised value???

No. Buy them a calculator

How can this be fixed...the borrower's need the additional funds.

Wait until the 10 days expire and start with new disclosures?

Didn't you base the original GFE on the amount they applied for? I don't really understand. A error by the loan officer however is not a changed circumstance. You might have to flesh out the details a little more.

The amount should have been the lesser of 90% of cost or 80% of the appraisal. Loan officer calculated the loan amount to be $240,000 but should have been $260,000.

How could you know the appraised value when the GFE was done?

eta: Once you got the appraisal and re-calculated, you would have had 3 days to re-issue a revised GFE based on the 80% (assuming that was the lower amount)

How did you know the appraised value when you issued the GFE? Is this loan a refinance? But to answer your question we would redisclose citing 'borrower requested increased loan amount'.