This is a file where mortgage insurance is required.

Initial LE – This was disclosed with monthly MI.

Revised LE #1– The borrower requested to switch from monthly to upfront MI which is a valid change in circumstance. However, the Revised LE went out without the Upfront MI showing in Section B of the LE.

Revised LE #2 – The borrower requested an increased loan amount, so we issued a revised LE and added the Upfront MI in Section B. based on the new loan amount.

What if any cure is owed to the customer? Can the revised LE#2 be the new baseline since it was at the borrower's request to increase the loan amount and the fee increased due to that changed loan amount?

If the revised #2 LE was more than three business days from the request for upfront MI - you are outside of your changed circumstance timeline and it would be 0% tolerance.

I would say that the omission on the first LE was a disclosure that was not in good faith and, setting aside the timing aspect, would be 0% tolerance. I don't think the "correction" on the 3rd LE would reverse the error from the 2nd LE because the valid change related to the loan amount is only really impacting a portion of the change with the largest reason for the difference in the fee being the lender's error.

My opinion is that you would have to correct for the whole fee but there may be some nuance that I am not thinking of here.

Basic rule -- You cannot correct an LE error of omission if you had, at the time the LE was prepared, the information needed to provide the correct estimate. Revised LEs are permitted, subject to the three-business-day timing requirement, to adjust earlier estimates due to a changed circumstance.

Realizing that you forgot to include a cost that was available at the time of the original estimate is never a valid changed circumstance.

Thank you all for the input. That is as I expected but always helpful to get reassurance.