Customer applied for a VA loan. After the customer received the initial closing disclosure they wanted to increase the loan amount so they did not have to bring any money to closing. The result of the increased loan amount caused the VA fee to increase which is a zero tolerance item. Does this constitute a valid changed circumstance allowing us to update the closing disclosure with the higher VA fee without causing a tolerance violation?

Yes it would be a valid COC as the VA fee is based on the loan amount.

Agreed. Borrower requests are always a valid CC.

I'm feeling rusty -- or senile and appreciate some confirmation or clarification on whether the bank may/may not increase origination fees due to a borrower's request to increase the loan amount. While origination fees are subject to zero tolerance, is there a prohibition against increasing these fees even though they are triggered due to a CC such as a borrower requested increase in the loan amount? Let's say for example the origination fee is 1% of the loan amount, and the loan amount increases due to borrower request, can the bank increase the amount of the origination fee due to the qualified CC? I was thinking that this is permissible, but have come across a couple of guidance docs from WK and Encompass that indicate that increases in originator fees are not permitted due to a loan amount change. Now I'm puzzling.

Under §1026.19(e)(3)(iv)(A), a changed circumstance affecting settlement charges can include, per paragraph (2), "Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided."

The consumer's request that the dollar amount of the loan be increased is not one of the examples provided in the commentary to this section; however, it would most certainly be "information specific to the...transaction that the creditor relied upon when providing the [initial loan estimate] and that was inaccurate or changed after the disclosures were provided." If the origination fee is a percentage of the loan amount, it would be directly affected by the increased loan amount, and, assuming a timely revised loan estimate is issued with that increase, I see absolutely no reason it would not fit the wording of the regulation exactly.

Reread the guidance from WK and Encompass to see if there are specifics cited that would justify such guidance. Absent such specifics, I'd question the accuracy of those guidance documents.

Thank you John.

Here is the guidance found in the Encompass Q&A doc that sent me into a tailspin yesterday afternoon. It is found here http://elliemae.com/rt-faq?part=9&question=14

"If 'points' (origination fee) are being charged that are not discount points and the loan amount changes, can the origination fee change?
No. A change to an origination fee paid to the creditor or mortgage broker falls within the zero tolerance category, since it disclosed as a dollar amount and is not an interest rate dependent charge. Citation(s): §1026.19(e)(3)"

fwiw, I've found a number of errors in Encompass' interpretation of the Regs and their doc prep.
Sometimes you have to go to support to get clarification and/or correction.

Let's try to avoid evaluations of a particular vendor or product in these public forums.