@John - Can you point me to the Regulatory citation for that treatment?

I think I misread one of my Compliance charts when I answered previously, so I am leaning towards agreeing with your above statement. Practically speaking though, I am still confused as to how that would functionally work. The lender puts the fees from the WPL provider that is not an affiliate into the LE. The borrower randomly chooses an affiliate of the lender. As it would just be an "informational" revised LE to disclose who the borrower actually selected and not anything required due to a COC, at what point would the 0% tolerance standard even be established? Let's say no other fees changed on the loan, when would the lender send out a revised LE with the Title Fees charged by the affiliate? Is it a required COC once it is known the borrower selected an affiliate?

Let's say no other fees changed on the loan, when would the lender send out a revised LE with the Title Fees charged by the affiliate?

You wouldn't unless it is simply a courtesy LE to reflect the fee changes. If they choose an affiliate, even one not on your list you cannot reset your tolerance from the original LE. It does not qualify as a changed circumstance.

(3) Good faith determination for estimates of closing costs.

(i) General rule. An estimated closing cost disclosed pursuant to paragraph (e) of this section is in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed under paragraph (e)(1)(i) of this section, except as otherwise provided in paragraphs (e)(3)(ii) through (iv) of this section.

(ii) Limited increases permitted for certain charges. An estimate of a charge for a third-party service or a recording fee is in good faith if:

(A) The aggregate amount of charges for third-party services and recording fees paid by or imposed on the consumer does not exceed the aggregate amount of such charges disclosed under paragraph (e)(1)(i) of this section by more than 10 percent;

(B) The charge for the third-party service is not paid to the creditor or an affiliate of the creditor; and

(C) The creditor permits the consumer to shop for the third-party service, consistent with paragraph (e)(1)(vi) of this section.

Justin C -- The regulatory reference is 1026.19(e)(3) -- The three romanette-numbered paragraphs clearly indicate which tolerance limit applies.

So, like Dan said above though, a courtesy LE is not a valid COC. So, in what situations does the 0% standard actually get imposed? When another valid COC occurred and the lender updated the Title fees with the affiliate information after they are made aware the affiliate provider was chosen to perform the service?

So, in what situations does the 0% standard actually get imposed?

If I'm understanding your question the tolerance would be imposed based on the estimated charges of the initial LE vs. the actual charges disclosed on the CD.

If the initial LE disclosed $500 for title services but they are performed by an affiliate and the title services were $700 the lender can reissue a courtesy LE to show the increase costs. But when the loan is closed the $700 disclosed on the CD would be compared to the $500 on the initial LE and the lender would be $200 out of tolerance on this specific charge.

Since an affiliate was chosen for the services the tolerance threshold set by the initial LE for that service cannot be reset.

That would be the case even though the lender disclosed $500 on the initial LE, which corresponded with the $500 that was shown as the estimated charge by the settlement service provider listed on the WPL/SSPL?

The lender did what they were supposed to do initially. They matched the initial LE fees with the WPL/SSPL provider estimate. Just because the borrower randomly selected an affiliate that charged $700 for said fees, then the lender has a $200 cure on their hands?

Just because the borrower randomly selected an affiliate that charged $700 for said fees, then the lender has a $200 cure on their hands?

Yes.

That wouldn't seem fair to the lender in any way, shape, or form. If that is the case, then I guess the takeaway should be if you have an affiliate then you should be sure to select them as the provider to list on your WPL/SSPL. If one has multiple settlement service providers as affiliates, then a lender could end up having a lot of tolerance cures.

Justin we have given you the regulatory cites. Regardless if you consider it fair or not if an affiliate is chosen as the service provider, either by you or the applicant, those charges fall in the 0% tolerance category.

You will find no exception in the Reg. to support otherwise.

I don't feel like the Regulation necessarily addresses the issue exactly at hand. I don't really think it is a scenario imagined by the Regulators, but based on the available information I agree that it is a 0% tolerance standard and if a borrower haphazardly picks an affiliate of the lender then there could be various tolerance cures.

As stated previously, in TRID the term "affiliate" means any company that controls, is controlled by, or is under common control with another company. Any company has control over a bank or over any company if the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company.

That being said, I don't think the following meets that definition so I'm requesting other opinions:

Bank Director personally owns 25% of a firm that provides settlement services. That same Bank Director owns 5% of shares of the Bank through a irrevocable Dynasty trust for which is a trustee.

Any takers?

With the given information, I'd say it's not an affiliate for the purposes of 1026.19(e)(3).

Thank you.