I have an odd situation. We would like to farm-out some underwriting on our secondary market department loans to a third-party (such as when applications increase, to handle the overflow). So the underwriting we perform at times as the creditor goes in Section A. However, the underwriting we send to a third-party would instead go in Section B as a charge the borrower did not shop for. But at the time of application or early in an application’s process, we aren’t sure if we will be doing the underwriting or that third-party. I can’t find if, even if it’s the same cost, we can merely change the charge from Section A to B, or visa-versa, without triggering a zero tolerance violation. This doesn’t seem to be a change circumstance to me, but I may be wrong. Will you please provide some advise or a cite that deals with changes in Sections A and B in this way?

"Will you please provide some advise or a cite that deals with changes in Sections A and B in this way?"

There is no citation. IMHO - you need to decide upfront as there is no changed circumstance.

Yes, Randy I lean that way as well. Yet the general rule for a good faith determination in 19(e)(3) that an estimated closing cost “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.”
So it would seem that the all could be okay since the cost isn't changing, but if it can be switched between Section A or B without a changed circumstances is the unknown. The paragraphs (e) (3) (ii) through (iv) in the citation involves fees not subject to he tolerances and changed circumstances. I just wish there was a definite cite or other regulatory guidance on the issue.

There is nothing in the regulation that says it's OK to move something between A and B, nor is there anything that says you can't. The only distinction is that certain costs must go in section A and only such costs. Except for loan broker and loan originator payments, nothing that's paid to a third party can be in that section. Everything else in section A is assume to be paid to the lender.

In the early days of TRID there were a lot of problems with systems that automatically created a full tolerance violation when costs were moved between A and either B or C. Is that still the case in your system? Can you override it? The regulation doesn't call for a tolerance violation if the only difference other than adding or dropping a recipient name for the payment is its location in section A, B or C.

Thanks, John. Our system is okay. But like you I don’t see anything that says it's okay or not okay. I appreciate your and Randy’s input.