We have a loan where the lender provided the customer with a lender credit on the LE that exceeded the amount of the actual fees. The title fee was incorrect and since the work was done by an affiliate, zero tolerance. In addition to the balance of the unused lender credit, the customer is also getting a cure for the title fee. Since we were paying the closing costs and actually over credited the customer, are we required to also credit the customer with the cure amount? Thanks for any help!

Sorry, but yes.

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Seriously, it's unfortunate, but you have to look at each 0% tolerance cost (including the "negative cost" lender credit) separately. You cannot net one against another.

Thanks so much!

It sounds like the borrower didn't have to pay any fees. I thought tolerance cures were based on what was disclosed compared to what the borrower actually paid. I can see giving the borrower the full lender credit, but why would there be a tolerance cure on top of that if the borrower didn't pay anything?

The comparison is between the fee as estimated on the LE and the actual fee "paid by or imposed on" the consumer.

The increased title fee was imposed on the consumer in the settlement, even though the consumer didn't actually pay anything. Put another way, if the title fee imposed was the same as the estimate on the LE, the consumer would have come away with more cash. So the cure payment ensures that is what happens.

Similar but different.............

Our bank has a "no cost" real estate loan product that we can offer to applicants once their income has been verified/qualified for this type of loan. Obviously, this can't be done at application and our Loan Estimate shows the fees as paid by borrower. As the application is moved through the closing process, it is determined that this application qualifies for a "no cost" loan and all fees will be paid for by lender. On the Closing Disclosure, the fees are listed as paid by lender. All that said, to ask a tolerance question. When working on the LE, a clerical error was made and a fee was not included. Now, as we are working on the Closing Disclosure, we list the deleted fee as paid by lender. This fee is 0% tolerance because the borrower would not have been able to shop, if this were a borrower paid fee. We now have a tolerance cure. With this tolerance cure showing, the bank will pay the fee (lender paid fee) PLUS reimburse the borrower because this is an error causing a tolerance cure. Is this correct? I just don't understand why we pay twice (fee plus to borrower). Am I missing something?

You can add as many fees as you wish on the CD at closing, and if those added fees are paid by the lender there is no cure triggered by those added fees.

No, this is absolutely not a tolerance cure situation. A tolerance violation and "double payment" may have been the result under the old RESPA HUD-1 rules, but not under TRID.

If you did not impose the fee on the consumer at closing, you have no tolerance violation. By listing the cost in the paid by others column (tagged as lender-paid) and paying the fee yourselves, you have not imposed the cost on the consumer.

This is one of the most significant improvements of the closing disclosure over the HUD-1 Settlement Statement -- the addition of seller-paid and paid by others columns.

To clarify my earlier response to this question -- The lender can put the first estimate of the title fee on the closing disclosure in the borrower-paid column and the difference between that amount and the actual title fee in the paid-by-others column, tagged as lender-paid, and that takes care of that tolerance violation. Then the amount of lender credit from the loan estimate has to be included as a lender credit (specific or general) on the closing disclosure to avoid a tolerance violation on that item.

Aall right then, thank you for your response. Now to the LOS to determine why it is saying that this is a tolerance issue. We get a critical warning if we don't include a tolerance cure. Another day, another dollar........................Mercy!

If you can override it, I think you should do so. Based on what you've said, I don't see a violation.

John,

Have you heard anything about LOS recognizing not to do a lender credit cure for situations where a "cure" was itemized for a specific fee? Somebody mentioned this on another discussion forum regarding a similar question.

Example: Say an Appraisal Fee in Section B is not disclosed on the initial LE. This is caught when doing a valid change of circumstance for another fee. The appraisal fee is itemized in the system as Paid-By-Others (Lender) in the amount of $400. Let's say that when the invoice came back from the appraiser, the fee only ended up being $300. I believe that the LE that was produced based on the $400 fee would have showed this amount as a Lender Credit. When it comes time to do the CD, does the lender need to honor the $400 appraisal amount that was estimated, or does the cure remain at $300? We had some commenters mentioning that their LOS would recognize the $300 only due to the specific itemization.