We do not lock rates. With the change to prime, our borrower's rate has increased since the LE was issued, and the increased rate was disclosed on the CD provided to the borrower. Is this permissible to handle this way? Do we need to do anything differently?

You're fine. A change in rate (unless there's a lock in place) between the LE and the CloD is not a problem. Where you need to be careful is changes between the time the CloD was issued and closing that increase the finance charge so that the APR on the CloD you issued before closing is no longer accurate.

Thanks John!