We closed a FHA loan with a wrong percentage of MIP;, therefore, the monthly MIP that we disclosed and are collecting from the borrower is incorrect (we are short). Can this be corrected post-closing? I assume we would have to provide a new CD as the monthly MIP affects the APR but can we collect a higher monthly payment from the borrower after closing?

Absolutely not. You bought that portion of the MIP.

This is a FHA loan. We don't order MIP prior to closing. The loan closes and then we get billed for the premium after closing. The application that we submitted to FHA for the MIP does show a 30 year term. We just disclosed a 15 year term on the LE and CD which results in a lower premium. Can we issue a new CD post closing showing the higher premium and the correct APR and start collecting the higher premium from the borrower?

What would be the point of TRID if you could tell a borrower their payment is $X at closing and then just tell them after closing that it's going to be more because of a Bank error? If something happened that changed after closing, then maybe depending on timing and what happened, but bank error = bank paid.

Just add a 3rd opinion - Randy & IR are absolutely correct. You don't get to penalize the borrower for the bank's mistake.

" We just disclosed a 15 year term on the LE and CD which results in a lower premium."

You disclosed a 30 year loan with a loan term of 15 years on your LE and CD? If that is the case, you have a lot more issues than the annual FHA MIP.

No..we disclosed the rate for MIP as if the loan was a 15 year term rather than a 30 year term. The cost of MIP depends on the loan term.

OK, then you can charge the customer for the amount that was disclosed, and then the bank will have to make up the rest of the annual MIP payment out of their own pockets.

Thank you!

It's an expensive mistake and a learning opportunity if you want any good to come of it. Inherent_Risk put it best. There are no Oops calls in final disclosures and contract terms. At its heart Reg Z is a disclosure reg, and the bank made the disclosure.

However, had the bank overdisclosed the MI amount, then a new CD and refund to the borrower would be required under TRID, correct?

It depends if it impacted the actual closing costs.

I want to make sure i'm following, since we don't have MIP here.....

Along the same lines (i think).....let's say on a TRID home purchase, the homeowner's insurance is properly quoted on the LE. The borrower buys a policy and pays let's say $1500 for 12 months. On the initial CD, the bank fails to include anything for homeowner's insurance. Following this line of reasoning, does the bank now have to reimburse the borrower for the homeowner's insurance left off the CD?

Or, to be perhaps more realistic...let's say the bank quoted $1200 on the LE and failed to update the amount on the initial CD and leaves $1200 on the initial CD for homeowner's insurance. Does the bank owe the borrower $300? It is of course an unlimited tolerance item, but we don't seem to be concerned about what bucket it belongs in, but just the fact that the bank made an error by showing $1200 when they should have showed $1500.

Since that sort of error would result in a disclosure not made in good faith, there are no "unlimited" tolerance items for items that are not disclosed in good faith.

Official Interpretation
19(e)(3)(iii) Variations permitted for certain charges.

Read Comment 3

I'm not disagreeing Randy, i just want to be sure i have this:

So, the bank's $1200 quote on the LE IS in good faith.

Bank makes an error by not updating the insurance on the initial CD to $1500.

Bank's error, by definition, means the initial CD was NOT issued in "good faith".

Is that right? I'm asking because the way i'm reading that section, it seems to be focused on good faith when it comes to disclosing fees for the LE and not really the CD....but maybe i'm missing it.

Well, if you are sitting on a $1,500 bill for homeowner's insurance to pay at closing and you put in $1,200 - where is the extra $300 going to come from? You going to back to the borrower and ask for the money or are you going to short pay their insurance? Not sure I understand how the bank would not have to pay for this error.

In my scenario Randy, and in all of our scenarios on home purchase loans, the homeowner's insurance is paid before closing by the borrower.

That's why i used that example....it represents a bank error....but one that represents an item already paid for by the borrower.

Well, since such an event (if pre-paid) is not an event covered under 19(f)(2)(iii) and therefore (IMHO) the lack of a good faith disclosure still triggers a cure under 19(e)(3)(iii).