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#2179341 - 05/23/18 04:35 PM Lower Fee Amounts and Tolerance.
Permissible Purpose Offline
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Hello everyone,

I'm relatively new to TRID and have come across a situation that I'm not really finding much guidance on. I am hoping that one of our resident TRID experts can hopefully answer my question.

With regard to fees that are lowered on a redisclosed LE vs. what has been originally disclosed- would you use the higher, originally disclosed fee amount when comparing the LE to the CD to determine good faith?

For example: if I have a fee that is originally disclosed as 300, then later the fee is reduced to 200, but on the CD the actual fee total from invoice or title company, etc.is 300, would you use the 300.00 originally disclosed LE amount to compare to the CD amount? I am thinking yes, because wouldn't the lower total create a need to cure when this is truly not needed?

Also- I am assuming that you would want to re-issue the LE with lower fee amount and only use the higher total for tolerance check. Is this correct?

Thank you.

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#2179350 - 05/23/18 04:45 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
rlcarey Online
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You would use the original amount from the initial LE, unless you have an investor that requires something else. However, it does bring into question a violation of good faith on the revised LE that was issued.
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#2179376 - 05/23/18 05:25 PM Re: Lower Fee Amounts and Tolerance. rlcarey
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Thank you for your response!

Would you mind explaining the comment on violation of good faith please?

Say for example it's an appraisal fee and this a zero tolerance fee. Originally the fee is 350 for full appraisal, but the lender opts to do a drive-by at reduced price. As a result, the lender changes fee and rediscloses with updated fee so that the borrower has documentation of the reduced fee. Later, information comes out that the investor is requiring a full appraisal again and the fee is 350 on the CD. So in this case, wouldn't you use the 350 originally disclosed on the LE to compare to the CD amount of 350? Because if the lender were to use the reduced fee, wouldn't that lead to unnecessary curing (150 credit to borrower)?

Thanks.

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#2179382 - 05/23/18 05:40 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
RR Joker Offline
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This appears to be a prime example of why NOT to issue a revised LE for no required reason. My opinion is that you will be curing it as you did not do a CC when the investor found fault with using a lesser type. It also brings to question why the LO felt it would be okay to do the lesser appraisal in the 'second' place, which mean you may not have even had a valid CC.
Last edited by RR Joker; 05/23/18 05:41 PM.
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#2179383 - 05/23/18 05:41 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
rlcarey Online
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Unless you handled all of those issues as a changed circumstance, then you have a variety of issues, especially if you have an investor involved. All bets are off on what they may specifically require. You normally can't sell a loan into the secondary without an appraisal, so this might not have been a good example.

But, you only reset your original tolerance baseline with a changed circumstance and that only happens when there is an "increase" in a fee or an additional fee. Anything else does not impact the original baseline.
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#2179398 - 05/23/18 06:00 PM Re: Lower Fee Amounts and Tolerance. RR Joker
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Thank you.

So best practice would be to not re-issue the LE when fees are lowered vs. what is originally disclosed.

I was under the impression that some would provide updated documentation to reflect fee changes.

Also- please forgive my example, it's probably not the best scenario to where a fee would be lowered vs. what is originally disclosed. I'm sure that there are better examples of where fees are lowered due to overestimating certain charges. It's been several years since I've worked in loan ops. I work on compliance software currently, so I am just trying to understand all of the various situations that deal with redisclosure and tolerance assessment.

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#2179399 - 05/23/18 06:00 PM Re: Lower Fee Amounts and Tolerance. rlcarey
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Thanks again!

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#2179412 - 05/23/18 06:34 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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I think the major point is being missed here, John C.
You cannot reissue the LE without a valid changed circumstance and lowering a fee is not a valid changed circumstance.
You have to look at what prompted the fee change and the LO changing his mind is not a valid CC.
Look to the definition of valid changed circumstances in TRID.
If you have one, then you can redisclose.
Also keep in mind that a bank error is never a valid changed circumstance.
Lastly, the Loan ESTIMATE is just that...an estimate of closing costs. Actual fees appear on the CD so there is not reason to go back and redisclose to show an actual fee, nor is it allowed because there is no valid CC associated with just getting an invoice.

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#2179419 - 05/23/18 06:40 PM Re: Lower Fee Amounts and Tolerance. Truffle Royale
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Thank you Truffle.

I think that I am confused because of a snippet of text from the TRID Small Entity Compliance Guide.

"If a creditor decreases a charge on a revised Loan Estimate or Closing Disclosure, the creditor is not required to use the decreased estimate for purposes of determining good faith, but instead may rely on the amount originally disclosed"

So in the case of a CC and fee is reduced, what I am reading is that for good faith purposes, you would actually compare the previously disclosed (aka higher) fee amount to the corresponding fee on the CD.

My bad example of how fees changed during the process is probably leading to some of the confusion, lol.

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#2179426 - 05/23/18 06:50 PM Re: Lower Fee Amounts and Tolerance. Truffle Royale
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Originally Posted By Truffle Royale

You cannot reissue the LE without a valid changed circumstance and lowering a fee is not a valid changed circumstance.


Well, actually you can. You can issue an informational only LE to the borrowers at any time, but that all that it is, its informational.
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#2179427 - 05/23/18 06:54 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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^^^^ Agree with Randy's comment.
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#2179429 - 05/23/18 07:06 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
RR Joker Offline
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I'll third it.
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#2179466 - 05/23/18 08:25 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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Thanks again guys. I really appreciate your quick responses and opinions.

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#2179489 - 05/23/18 09:11 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
John Burnett Offline
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And, if you do issue a revised LE because of an actual changed circumstance that results in a higher cost, the revised LE is required to include current good faith cost estimates for all the services listed, not just the one involving the changed circumstance. Sometimes that can cause you to reduce a cost on the revised LE because your best information requires you to, but you are not reducing the basis for the service when you do it.
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#2179508 - 05/24/18 12:26 AM Re: Lower Fee Amounts and Tolerance. John Burnett
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Thank you John.

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#2195916 - 10/18/18 10:17 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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What if the lower fee disclosed on a revised LE was by accident? For example, if the VA funding fee was disclosed on the original LE as $10,000.00. A subsequent revised LE indicates the VA funding fee as $5,000.00. The LE was revised for a different reason and the lowered funding fee was due to clerical or system error.

Let us also further assume that the discrepancy was discovered after the initial CD was issued.

Would we still be able to use the original LE as our baseline? The fee would be corrected on the final CD, which would mirror the initial LE.

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#2195999 - 10/19/18 07:21 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
John Burnett Offline
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Yes, because the comparison base for a fee is not adjusted when it's reduced. With the rare exception of lender credits, timely revised LEs (or CloDs or corrected CloDs) only increased costs result in adjusted good faith bases.

Nonetheless, the error is a Reg Z violation, because it's incorrect.

And, of course, you have a QC concern. Who, if anyone, is checking revised LEs before they are provided to the applicant/borrower?
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#2196000 - 10/19/18 07:24 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
John Burnett Offline
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And, although I am not in favor of dumping too many disclosures on the consumer, this is a case where the consumer could be relying on that reduced figure and show up short at the closing. I'd provide another LE with the correct numbers, explaining that the VA fee had been reduced in error, and call the consumer's attention to the new Cash to Close amount.
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#2196006 - 10/19/18 08:12 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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Take note that they poster said the initial CD had already been issued...but was corrected on the 'final' CD so they couldn't issue a corrected LE at that point.

My question is, can it be corrected post initial CD?
Last edited by RR Joker; 10/19/18 08:13 PM.
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#2196021 - 10/19/18 10:19 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
rlcarey Online
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Your baselines are set with the initial LE. They are only adjusted with a valid changed circumstance and then only higher. Your baseline is compared to the final CD.

Anything else in between would be errors in violation of the good faith provisions. There is no specified cure for a error in good faith. Corrective actions would be up to the bank and any investor considering whether the customer was misled, is this a pattern and practice and could the UDAAP card be pulled.
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#2196257 - 10/23/18 08:43 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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Thank you, everyone!

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#2270260 - 05/10/22 04:43 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
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I am struggling here and I am just going to post in hopes that someone can point me to the regulation. I have a CD that is going to be issued where the borrower and seller are splitting the fees. The fee is disclosed on my LE as $500 but now the seller is paying half, so I thought I remembered that for the tolerance calculations the amount that is used is the $250 and not the $500. Is that right or am I making that up? Where is it in the reg or the entity guide?

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#2270262 - 05/10/22 04:53 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
rlcarey Online
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What type of fee and what tolerance level are you talking about? If you disclosed $500 and later found out that the borrower and seller is splitting the costs, why is this a tolerance issue?
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#2270265 - 05/10/22 05:08 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
JobSecurity Online
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We are talking about title settlement agent fees. So we also had additional wire and courier fees added that were not disclosed on the LE.

So for my tolerance comparison from the LE to the CD. Would I use the $500 from the LE or the $250 from the CD (the amount that the borrower would be paying)? I am thinking since the borrower is only responsible for the $250 that is what is used for the comparison. If I use the reduced figures that the seller is paying then I have a cure, if I use the full amounts then there is not.

I thought I remember reading this was to be the figure the borrower would be paying but can't locate that, so maybe I made it up.

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#2270269 - 05/10/22 05:55 PM Re: Lower Fee Amounts and Tolerance. Permissible Purpose
rlcarey Online
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Is this unusual in your jurisdiction. In many jurisdictions, this fee us customarily split between the borrower and the seller. So, if the $500 that was quoted on the LE was not in good faith, then I agree that using the entire $500 would not be appropriate.
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