What defines a changed circumstance in mortgage lending?

A changed circumstance in mortgage lending is specifically defined as an unexpected event that affects the loan terms or costs. This involves any scenario where there is a significant shift in the situation surrounding the mortgage application that was not foreseeable at the time of the initial loan estimate.

Option C suggests that a borrower-requested change due to an extraordinary event defines a changed circumstance. However, while extraordinary events can certainly prompt changes in a loan scenario, they may not fully encompass all aspects of what constitutes a changed circumstance, especially if the borrower is already aware of the potential changes or if those changes result from their own actions.

In contrast, the correct understanding of a changed circumstance includes unexpected developments — such as changes in the borrower’s financial situation, changes in property value, or alterations in market conditions — that are beyond the control of the borrower and the lender. These factors obligate the lender to reassess the loan terms and provide a revised loan estimate, thus ensuring that the borrower is aware of any changes to costs or terms stemming from these circumstances.