We have a home purchase loan. On the Loan Estimate, the loan admin put a $5 E-Recording fee in Box E. Taxes and Other Government fees as a recording fee. However, after issuing the initial Closing Disclosure, it was found that the E-Recording Fee is being paid to the title company as an electronic recording service fee. Therefore, the fee should have been in Box C. Services You Can Shop for on the Loan Estimate.

The borrower did not shop for services, so all of the title fees moved to Box B. Services Borrower Did Not Shop For on the Closing Disclosure. My understanding is that the E-Recording Fee should also be moved to Box B and that this fee would be considered a prepaid finance charge per 1026.4I and Comment 4I-1.i (https://www.consumerfinance.gov/rules-policy/regulations/1026/4/#e).

My thought was that the fee would be subject to the 10% cumulative tolerance so a lender’s credit may or may not be necessary depending on if that tolerance is exceeded. However, my supervisor believes we must issue a full lenders credit for the fee as it is a prepaid finance charge and was not disclosed properly on the Loan Estimate. Am I misunderstanding something? Do we need to issue a lenders credit for the full fee amount since the prepaid finance charge wasn’t properly disclosed?

Your supervisor is mixing apples and oranges. TRID has tolerance cures. Disclosure violations involving the APR and finance charges can also be cured. They are not related.

However, any understatement of the finance charges that is no more than $100 on a mortgage loan is not a violation.

1026.38(o)(2) Finance charge. The “Finance Charge,” using that term and expressed as a dollar amount, and the following statement: “The dollar amount the loan will cost you.” The disclosed finance charge and other disclosures affected by the disclosed financed charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

(i) is understated by no more than $100; or

(ii) is greater than the amount required to be disclosed.

Thank you for the response! I started to doubt myself so I needed some external validation.

The 10% tolerance bucket is not out of tolerance. Additionally, the finance charge and APR are not out of tolerance. It's just a $5 fee so it truly doesn't impact much of anything.