If a purchase contract states that the title costs are split between the seller and the buyer, how is the LE prepared? Do you disclose the full amount on the LE, or only half of the anticipated cost that the borrower will pay?

Also, if at closing it is identified that a title fee is higher, how is tolerance handled; is the tolerance applied to the amount assigned to the buyer on the LE or the full amount?

I've seen aspects of this question asked and partially answered in relation to the CD, but not clearly in regards to the LE and how to handle if there is a tolerance cure required.

Thanks!

tolerance isn't applied on an LE so I'm not understanding that part of your question.

As to the part about the OTP and the LE, we would show the full cost on the buyer's side and a seller's credit for half on the LE.

1026.37(h)(1)(vi)-2:

2. Seller credits for specific charges. To the extent known by the creditor at the time of delivery of the Loan Estimate, specific seller credits, i.e., seller credits for specific items disclosed under § 1026.37(f) and (g), may be either disclosed under § 1026.37(h)(1)(vi) or reflected in the amounts disclosed for those specific items under § 1026.37(f) and (g). For example, if the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay half of a $100 required pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $50 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose the required pest inspection fee as $50 under § 1026.37(f), reflecting the specific seller credit in the amount disclosed for the pest inspection fee. If the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay the entire $100 pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $100 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose nothing under § 1026.37(f), reflecting that the specific seller credit will cover the entire pest inspection fee.

If the seller is not paying the entire fee, I would be treating it as a seller credit also and not disclosing as half a charge.

Thanks all for the input.

Truffle, apologies if my question wasn't clear; I wasn't saying the tolerance is applied to the LE, just that any tolerance is based on what is disclosed on the LE. You stated that you would show the full cost on the buyer's side and a seller's credit for half on the LE. That said, how would you treat a tolerance cure on the CloD? If the Purchase contract is explicit that costs are split, is a cure based on the full amount disclosed on the LE or the % of the cost that the borrower will be paying at closing?

For example - Purchase Contract States Settlement Fee will be Split between Buyer and Seller
LE - $700 cost in section C with a $350 credit in Seller Credits Section of Calculating Cash to Close Table

At closing the actual Settlement Cost is found to be $800
CD - $400 cost in Section C under Borrower Paid at Closing and $400 Under Seller Paid at Closing

Is tolerance calculated on the total cost, $800, or the borrower's portion, $400 and will the $400 amount potentially impact the 10% tolerance calculation?

The calculation is between the final cost paid by the borrower ($400) and the amount estimated to be paid by the borrower on the LE ($350). That's one reason I lean heavily toward the option on the LE to show the full estimated cost to be paid by the borrower and a seller credit for the seller's anticipated contribution. There would be no tolerance violation if the LE showed $700 cost and $350 seller credit and the closing disclosure showed $400 cost paid by borrower and $400 paid by seller.

The issue wouldn't come up if the lender had sent a revised LE with the adjusted OTP amounts upon learning of the increase.

Thank you John; would you have any concerns with the fact that the practice of disclosing the full fee on the LE, with the final borrower cost being the lower split amount that it undercuts the 10% tolerance calculation?

And yes, I agree that if the lender sent a revised LE reflecting the COC and the new fee, the issue would not present itself.

No tolerance issue for fees in Section C as your example said above.
When you quote a fee on the LE you should be basing it on the costs of the provider you show on your SSPL meaning you should KNOW what those costs will be without having to worry about tolerance.
If the borrower picks a company that is not on your SSPL, you don't have to worry about redisclosing or tolerance because Section C is unlimited. And if you're like us, you don't get the fees from the title company chosen till CD prep time so you don't have the opportunity to inform the borrower of any increase via LE.

Thanks Truffle; lets say the fee does increase at closing (settlement fee is $800 vs 700 quoted on the LE), is there a concern when the fee is split and reflect as only $400 in the borrower column on page 2 of the CD, because it will be the $400 that is used for the purposes of the 10% tolerance calculation?

I think you're trying too hard on this.
The only time a fee should come in higher is if the borrower goes with a provider not on your list.
If the provider is not on your list there are no tolerances to worry about.
Section C = no tolerance to worry about.
Fee comes in lower than what's shown on the LE = nothing to worry about
There's no place you're telling the system to figure out that $400 is more than half of the $700 you quoted on the LE.