Is the $100 tolerance for understatement based on the aggregate (or net) of all finance charges, or individual items included in the FC? i.e. what if interim interest is overstated by $200, and escrow fees are understated by $150… technically, not a problem if we go by net, because we are in a “net” overstated finance charge position. Is this how it works?

Yes, the tolerance is for the difference between what you disclosed as the total finance charge and the actual total finance charge.

Not necessarily - why was your interim interest overstated? Was it because the docs were dated and the loan closed later than originally predicted?

Yep, interim interest can be off a day or so, usually resulting in an overstatement of finance charges. So my concern, if it's somewhat significant dollars overstated, is it ok if it offsets somewhat significant dollars of a different finance charge that is understated?

You have to calculate your per-diem based on the time you think the loan is going to close when the disclosures are prepared. The per-diem being off because your loan didn't close on the date projected does not affect the accuracy of your disclosure (See OSC Paragraph 17(c)(2)(ii)). However, with that said, you can't also use the fact that the loan closed several days late to offset the fact that you omitted another finance charge and the net brings the loan into tolerance. Basically, you just ignore differences in the per-diem interest due to variations in the closing date to calculate the correctness of your disclosures.

Randy,
Once again, you've given me a clear answer, which I agree with. I think excluding interim interest understatements AND overstatements from the calculation of the $100 tolerance is the right way to go. Thanks again, and Happy Friday to you!