Mortgage Loan Originator (MLO) Licensing Practice Test

What is a situation that requires a creditor to provide a revised Closing Disclosure prior to consummation?

1. Change in down payment

2. Change in APR

3. Change in credit score

4. Change in closing attorney

The correct answer is: Change in APR

A change in the Annual Percentage Rate (APR) constitutes a situation requiring a creditor to provide a revised Closing Disclosure prior to consummation. The APR is critical as it reflects the total cost of borrowing expressed as a yearly rate, incorporating not just the interest rate but also points, fees, and other costs associated with the loan. If this rate changes significantly—specifically, more than 0.125% for fixed-rate loans and more than 0.25% for variable-rate loans—the lender is mandated to issue a revised Closing Disclosure to inform the borrower of these important changes. The necessity for a revised Closing Disclosure ensures that borrowers are fully aware of the terms of their loan and can make informed decisions before finalizing the transaction. This requirement is part of broader consumer protection regulations aimed at promoting transparency and preventing unforeseen costs at closing. In contrast, while a change in down payment or the closing attorney may lead to adjustments in the costs associated with the loan, they do not trigger the same legal requirement for a revised Closing Disclosure. A change in credit score might affect the loan terms or interest rate upon which the final approval is based, but it does not itself necessitate a revised disclosure because the APR is the primary factor that must be transparently communicated