Good morning,

During a recent loan review, we discovered an error on our TRID disclosures where a fee were omitted on the LE. The bank issued a lender credit to the borrower to cover the omitted fee; however, this particular fee should have also been included in the finance charge calculation and the omission has resulted in a finance charge that has been under disclosed by more than $100. Since the borrower was provided a lender credit to correct the TRID error, do we subsequently have to also provide refund for the understated finance charge?

How can a fee that the lender paid be a finance charge?

RLCarey, Are you saying that if we have to provide a tolerance cure for a charge that would normally be a "finance charge", that this charge should no longer be included in the calculation to determine accuracy of the APR?

Let's take a specific example. Say that you had a $100 fee for a property tax tracking service that would normally be a finance charge. You noted on a post-closing review that this fee was inadvertently left off of the final CD. Since you can't require the consumer to pay this fee after the fact, you would re-issue the final CD with the property tax tracking service of $100 shown in the paid by lender column. Since the bank paid the fee, it cannot be a finance charge.

If you reissued the CD and showed the $100 fee as paid by the consumer and you added a $100 general lender credit in order to cure, then you have a problem. General lender credits cannot be used to offset finance charges when calculating the finance charges and APR.

So it depends on how you handle it. If this is not the scenario you were describing, please give us some additional information.

OK so my situation is a little different in that, there was an increased charge for loan settlement which was disclosed on the final CD. The borrower received credit for the $300.00 increase, however when calculating the APR, I included this additional charge, but the LOS system did not so I calculated a understated finance charge. I am being told that if the charge was paid by the Bank (in way of the Lender Credit to cure tolerance) that the charge should not be included in the finance charge because it was never charged to the borrower. However, my opinion is that if it was disclosed on the CD as a borrower paid charge, then it should be included. Am I way off base?

According to what Randy wrote above, it's all about placement on the CD.
If you showed the additional charge as paid by the customer, then you're right to include it in the APR.
If you'd put the additional charge out in the paid by lender column, it would NOT have been included in the APR calculation.

Thank you both Randy and Truffle. I appreciate your clarification.

You are not off base, but this is an example of why using the itemization method with the columns is cleaner to me.

RL - I'm pretty sure we have discussed this before, but - do you use the columns method in all situations? My research led me to conclude that using the columns is accurate when you "catch" the cure at or prior to closing. However, if the lender has to issue a post-closing CD correction with an associated refund check, then the lender would use the General Lender credit field with the associated cure language in the Calculation Cash to Close section. One problem with the column technique is you don't get the cure language, at least not with the LOS we use.

Each situation is unique, but if you missed a cure, then I would agree. But in situations where can you use a specific credit, I would always recommend going that route.

Randy, Is there anywhere in the regulation that explains being able to use a specific credit to cure a known tolerance, as well as information regarding when you should include as a finance charge and when you should not?

Janet,

I can give you the reference for the specific cure language in the Reg. I will get to it tomorrow.

Randy -- Do you lose out on the cure language with your documents when you use the specific method?

In situations in which you can provide a specific lender credit, there would not be a tolerance violation and as such, there would be no cure to disclose.

Justin,

That would be great if you could point me in the right direction. I need to provide backup.

Thanks,

Janet