There have been variations of this question posed but our current situation does not appear to have been answered.

For title services, borrower shopped and selected a provider who was not on the provider list. The fees that were quoted will be disclosed in Section C of the CD Borrower Shopped.

Problem: While the loan was processing, we received the title report and there was a PASH endorsement that would be required. No revised LE was issued with a PASH endorsement. It should've been, I know.

Come CD time, where should we disclose the PASH endorsement and should we lender pay all or part of it?

I'm thinking Title-PASH endorsement (which we required and failed to disclose on the LE), should be disclosed in Section B of the CD because borrower did not shop for it since we failed to redisclose the LE with the PASH fee quote. It's not a service that was added on because borrower chose a different settlement provider. It was a fee that should've been quoted on the revised LE. It would still be a 10% tolerance item. It will definitely look odd because they'll be lone "Title-PASH endorsement fee" in Section B, and the rest of the Title fees in Section C of the CD.

If I calculate the 10% tolerance bucket based on the LE fees disclosed in Section C of the LE (dropping any fees that dropped off), then even though the quoted fees are in an unlimited tolerance bucket, I still can use the 10% tolerance bucket for fees quoted in Section C of the LE that didn't drop off. If I use that bucket calculation, it appears we do not have to lender pay.

How are others handling this?

In order for the 10% to apply, you have to meet the requirements under 19(e)(3)((ii) - including (C). Since the fees was for a service that the bank actually required and it was never disclosed under (e)(1)(vi) - the fee would be a 0% tolerance fee and not aggregated into the 10% bucket.

19(e)(3)((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.

What's a PASH endorsement? And, if it is a Title Related Fee, why wouldn't the company selected by the borrower be the one to perform the function and receive the fee?

Thanks Randy and @JPC. We are giving a credit because of the argument that customer did not shop for the service because they weren't aware. In reality, they couldn't have shopped for that service alone since that was a title service and the title company they selected would've been the only one who would issue the endorsement. They couldn't parse out that title service.

@JPC, the short explanation, a PASH is based on state law which gives public access rights on private lands. For certain types of properties, there must be access, such as beach access or access to practice cultural/native rights/practices. So, it's a common cloud to title that we need the title insurance company to endorse over.

Correct me if I am wrong, but wouldn't this section of the guidance provided in the Small Entity Compliance Guide apply to this situation?

7.10 What if the creditor does not provide an estimate of a particular fee that is later charged? (Comment 19(e)(3)(ii)-2)

Creditors are provided flexibility in disclosing individual fees by the focus on the aggregate
amount of all charges. A creditor may charge a consumer for a fee that would fall under the 10%
cumulative tolerance but was not included on the Loan Estimate so long as the sum of all
charges in this category does not exceed the sum of all estimated charges by more than 10%.
(Comment 19(e)(3)(ii)-2). For example, if the creditor requires lender’s title insurance, the
creditor must disclose the service (i.e., lender title’s insurance) and the fee for the service.
However, the creditor is not required to provide a detailed breakdown of all related fees that are
not explicitly required by the creditor but that may be charged to the consumer, such as a notary
fee, title search fee, or other ancillary and administrative services needed to perform or provide
the settlement service required by the creditor.

, the creditor is not required to provide a detailed breakdown of all related fees that are not explicitly required by the creditor

I don't think that covers a required endorsement.

What section would these fees go in? For example a notary fee as referenced in the answer above? We didn't disclose a notary fee on the LE, but the borrower shopped for a title company who then charged the borrower a notary fee. Would we put that in Section C of the CD (borrower shopped) or section H (other).

It's a fee charged by the title company so it goes in C with all the other title company fees.