We have a loan that is being sold to an investor. A compliance review by the investor says that we have a tolerance cure. We disagree and I'm just looking for some insight. And before I go any further, we are curing the tolerance because we don't want to risk the investor not purchasing the loan. Here is the scenario in a nutshell:

We disclosed $1,408 in fees in the 10% tolerance bucket on the LE. A couple of the Title fees changed and the total amount in the 10% tolerance bucket on the CD was $1,458. Now, according to my calculations, the tolerance for that bucket would be $140.80 which the $50 change in fees is well below that amount.

Here is the crux of our disagreement:

On the LE we disclosed the Title Examination ($150) and Title Abstract/Search as separate items. When we received the bill from the title company they had included both services under Title Abstract/Search so naturally on the CD, we only listed the one item. The compliance reviewer from our investor is telling us we can't use the dollar amount we disclosed for the Title Examination on the LE in our tolerance calculation. So he's saying we have to base our tolerance calculation on $1,258 ($1,408 disclosed on LE minus the $150 Title Examination fee) instead of the $1,408.

Are we off base here in thinking that there is no tolerance to cure or is the compliance reviewer from the investor correct?

This scenario is a great lesson for making certain that any fee you disclose on the LE gets disclosed using the same label on the CloD. You should have split that fee on the title company's bill into its component parts so that you could match the Title Exam and Title Abstract/Search items in the LE with identical items in the CloD. If you had done that, my guess is you would have been OK in the 10% tolerance.

While I agree your bank did not overcharge the borrower, your investor holds the winning cards here unless your bank folds its hand and retains the loan in portfolio. Even then, a hypercritical examiner might find fault with the labels on the CloD.

And while I am at it, if a bank allows the title company to prepare the CloD, it should remember that it's the lender's responsibility, and the lender has the final word on how the costs are disclosed, included their labels.

Well, since this is your service provider, you should know exactly what fees they charge and for what services. There is no provision to either break a fee that was disclosed as one fee on the LE to two charges on the CD or combine multiple fees on an LE into one charge on the CD. In other words, I agree with the investor.

I spent some time reading through 1026.19 so yeah, dangit, I agree as well. I'll have to spend some time with our secondary market processors.