Q: What are changed circumstances that affect eligibility?
A: A creditor also may provide and use a revised Loan Estimate and reset tolerances if a changed circumstance affected the consumer’s creditworthiness or the value of the security for the loan, and resulted in the consumer being ineligible for an estimated loan terms previously disclosed. (§ 1026.19(e)(3)(iv)(B); Comment 19(e)(3)(iv)(B)-1)
This may occur when a changed circumstance causes a change in the consumer’s eligibility for specific loan terms disclosed on the Loan Estimate, which in turn results in increased cost for a settlement service beyond the applicable tolerance threshold. (Comment 19(e)(3)(iv)(A)-2)
The creditor relied on the consumer’s representation to the creditor of a $90,000 annual income, but underwriting determines that the consumer’s annual income is only $80,000.
There are two co-applicants applying for a mortgage loan and the creditor relied on a combined income when providing the Loan Estimate, but one applicant subsequently becomes unemployed.
A creditor may also use a Closing Disclosure or corrected Closing Disclosure to reset tolerances when changed circumstances affect eligibility. (§ 1026.19(e)(4)). For information about using Closing Disclosures to reset tolerances, see sections 10.3, 11.11, 12.2 and 12.3 below.