Scenario:
1) LE issued with a “rate lock” showing APR of 3.000% (for example). Rate lock date is still in future.
2) During underwriting, the product changed (as borrower did not qualify) so APR increased to 4.500%. There were no changes to fees or other tolerance items so a revised LE was not issued.
3) CD was issued with the 4.500% APR, and the 3 days is now up.
Are we okay with showing the increased APR in our CD only? I do not see the need to have issued a revised LE to reset tolerances since no fees changed. The rate changed due to a product change which is a valid changed circumstance.
4) Can we proceed to close?

Since your product changed you should redisclose and wait your 3 days then close.

Yes, the first place you have to show the increased APR is the closing disclosure. There is no tolerance test on the interest rate or APR (or payment schedule reflecteing them) between the LE and the CloD. Yes, you can proceed to close.

The product change is only a changed circumstance if it increases a fee in excess of the applicable tolerance limitation. In this case, there was no such change.

If the change occurred after the CloD was issued (rare, but it could happen), you'd have to issue a revised CloD with the increased rate, APR and payment schedule and reschedule closing so that the revised CloD is received three BD's before consummation.

They already did when they issued the original CD - correct? Then you are good to go. I hope you have documentation that cancelled the rate lock.

Thank you! This is helpful. I am concerned about the rate lock bit - but am consulting with our legal team.

I should read all points before replying!

Welcome to BOL's Discussion Forums, Joe P.