By: Elva Coffey-Sears
While the new TILA-RESPA Integrated Disclosure rule retains the tolerance limitations for certain settlement charges, it also includes numerous changes and clarifications, making it a vital topic to include in your pre-implementation training program. To ensure you are up-to-date, check out the following list summarizing the more significant points:
- Estimates must be made in good faith and consistent with the best information reasonably available at the time of the estimate. If the charge ultimately paid by the borrower exceeds the estimated amount by more than the prescribed tolerance, the estimate is considered “not in good faith.”
- The zero percent category has been expanded to include fees for required services that are paid to an affiliate of the creditor or mortgage broker or to an unaffiliated third party if the borrower is not permitted to shop for the provider.
- Transfer Taxes remain in the zero percent category if they are paid by, imposed on, or the legal obligation of, the borrower. Check your state and local ordinances to confirm who is legally responsible for these taxes.
- Lender Credits (including general credits and credits for specific fees) generally may not decrease from the amount disclosed on the Loan Estimate.
- The ten percent category includes fees for required services from a provider selected by the borrower from the lender’s written list. Fees for required services which the borrower is not permitted to shop for are subject to zero tolerance, while fees for services which the borrower is permitted to shop and does not select a provider from the lender’s written list remain in the category of charges that can change.
- Recording fees continue to be included in the ten percent tolerance category.
- Charges enumerated in the new rule that may change without regard to tolerance include prepaid interest, property insurance premiums, amounts placed in escrow, impound, reserve or similar account and charges for required services from a provider selected by the borrower that is not on the lender’s written list.
- Estimates for services that are ultimately not performed must be removed from the total amount of estimated charges prior to calculating tolerance.
- In the case of a changed circumstance that does not result in more than a ten percent change in the aggregate of all costs subject to the ten percent limit, the original estimate (not the revised estimate) provided to the borrower is compared to the actual cost for calculating tolerance.
Be sure to check out important resources for developing your training such as regulation [12 CFR 1026.19(e)], the Commentary and section 7 of the CFPB’s Small Entity Compliance Guide. Given the importance of understanding the tolerance categories and the significance of the changes and clarifications, you may want to include some or all of the examples from the Commentary.