Today in our wholesale channel, we require that brokers pay for any RESPA tolerance cures caused by deficiencies in the broker's initial GFE. We send the full broker compensation to the settlement agent to net out the cure before issuing funds to the broker.

We have received guidance that this procedure will not be acceptable under the new Reg Z comp rules. The concern is that the Fed will look at tolerance cures as terms or conditions of the loan and that making the broker pay the borrower will be an impermissible adjustment to comp.

Our view is that compensation is wholly separate from tolerance cures as compensation comes from the lender and cures are paid to the borrower. Has anyone heard similar guidance from the Fed or other resources?

I appreciate any thoughts or insights on this dilemma

Actually forcing the broker to cure the tolerance is a violation of Section 8 of RESPA. So you have a bigger problem then the Reg. Z compensation rule. See Q&A #6 on page 41 of the FAQs.