Mortgage 101: Navigating “Change of Circumstance” Triggers
You’ve finally received your Loan Estimate (LE), and everything looks solid. Then, a few days later, a revised version hits your inbox with different numbers. What gives?
In the mortgage world, this is known as a Change of Circumstance (CoC). Under the TRID (TILA-RESPA Integrated Disclosure) Rule, lenders are actually required to give you updated accurate cost disclosures when certain specific events happen. It’s not just paperwork for the sake of paperwork—it’s about ensuring the final numbers at the closing table don’t come as a shock.
What exactly defines a “Change of Circumstance?” It isn’t just a random update or a broker’s whim. According to Regulation Z (12 CFR §1026.19(e)(3)(iv)), a valid Change of Circumstance is an event that impacts your eligibility for the loan, the value of the property securing that loan, or the actual settlement costs.
Essentially, if new information comes to light that changes the “deal” we originally disclosed, we have a regulatory obligation to update those terms.
5 Common Scenarios That Trigger New Disclosures
While many things can change during a loan move, these five scenarios are the most frequent reasons you’ll see a revised Loan Estimate.
1: Product or Program Changes
If you decide to switch from a 30-year fixed-rate mortgage to an ARM or move from a Conventional loan to an FHA product, your costs and terms will shift. Regulation Z allows for revised disclosures here because the program change directly alters the fees and eligibility requirements.
2: Rate Lock Events
A common misconception is that a rate lock expiration is the trigger. In reality, the trigger is locking the rate itself. If your initial Loan Estimate was “floating” (no locked) and you decide to lock it later, we must provide a revised LE within three business days to reflect the final interest rate-dependent charges, such as points or lender credits.
3: Changes in Loan Information
Several moving parts can affect the “good faith” math of your initial disclosure:
Appraisal Values: If the appraisal comes back lower or higher than expected, it might change your Loan-to-Value (LTV) ratio. This could trigger a need for Mortgage Insurance (PMI) or change your eligibility for certain interest rates.
Undisclosed Fees: If a new service is required that wasn’t known at the start, it affects the settlement costs and must be disclosed.
Broker Compensation: If changes in the loan structure affected disclosed lender credits or fees, a revision is necessary to maintain tolerance standards.
4: Escrow & Settlement Cost Adjustments
If you choose to waive your escrow account and pay your property tax and homeowners insurance on your own, some of your loan costs may change. Waiving escrows does not automatically mean new paperwork is required. However, if your decisions affect certain fees, prepared items, or costs that are limited by federal “tolerance” rules (which restrict how much certain charges can increase), we are required to provide you with an updated Loan Estimate or Closing Disclosure. If an updated disclosure is needed, it will clearly show any revised costs and will be delivered within the timeframes required by federal law. Our goal is to ensure you have accurate, transparent information about your loan before closing.
Seller-Paid Fees & Concessions
If you negotiate with the seller to have them cover $5,000 of your closing costs after the initial LE was issued, that’s great news—but it’s also a Change of Circumstance. Because these concessions change the final settlement costs you are responsible for, the documents must be updated to reflect the new reality.
Why Accuracy Matters (The “Tolerance” Rule)
These rules exist to uphold good-faith disclosure standards. The government sets “tolerances” on how much certain fees can increase between the initial estimate and the final closing costs.
By issuing a revised Loan Estimate when a valid Change of Circumstance occurs, we ensure that the numbers you see are the most accurate reflection of your loan’s current status. It’s about protecting the integrity of the process.
What should you do? If you receive a revised LE, don’t panic. Take a moment to:
Compare it to your previous version.
Look for the specific “Reason for Revision” (usually noted on the form).
Ask questions. Our team is here to explain which “trigger” caused the change and how it impacts your bottom line.
Understanding these triggers takes the mystery out of the mortgage process. We’re not just moving numbers around—we’re keeping your loan compliant and your closing on track.
