Which of the following statements about loan originators is TRUE?

The statement that loan originators need to document reasons for revised estimates is accurate and reflects important regulations under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). When a Loan Estimate is provided, it sets a clear outline of the estimated costs involved in the transaction. If circumstances change after the initial Loan Estimate has been provided—such as a change in loan amount, loan type, or other significant factors—it is necessary for the loan originator to issue a revised Loan Estimate. Documenting the reasons for these changes is essential, as it helps ensure transparency in the lending process and provides a clear audit trail that protects both the consumer and the lender. This documentation requirement reinforces the importance of compliance and consumer protection in mortgage lending practices.

In contrast, loan originators are restricted in their ability to collect fees before disclosures are made and must follow the regulatory timeline for providing Loan Estimates (which is typically three business days after receiving a loan application). Additionally, charging borrowers for pre-qualifications is generally not a practice supported under regulations meant to protect consumers from unnecessary costs before they proceed with formal loan applications.