TILA – RESPA Integrated Disclosure – Part 4 of 5: Curing Tolerances

Curing Tolerances

 (Part 4 of 5)

(Jeff Sorg, OnlineEd) – On the Loan Estimate, certain charges are not subject to a tolerance limitation. This means that the amount charged the consumer may exceed the amount disclosed on the Loan Estimate by any amount. Examples of these charges are:

  • Prepaid interest, property insurance premiums, amounts placed into escrow, impound, reserve, or similar type accounts;
  • Services required by the creditor if the creditor permits the consumer to shop for such services and the consumer selects a third-party service provider not on the creditor’s written list of service providers; and
  • Charges paid to third-party service providers for services not required by the creditor.

However, at consummation, creditors may only charge more than the amount disclosed on the Loan Estimate, provided the original estimate was based on the best information reasonably available at the time of the Loan Estimate disclosures.

Some charges are subject to a 10% cumulative tolerance. The charges subject to this tolerance limit are:

  • Recording fees;
  • Charges for third-party services where the charge is not paid to the creditor or the creditor’s affiliate; and
  • Charges that arise out of the consumer’s shopping for required services where the creditor allows the consumer to shop for and contract with that service provider that is not on the creditor’s written list of providers.

There are other charges that are subject to the zero tolerance rule. In the case of these items, the creditor may never charge more than the estimated amount, unless there is a changed circumstance or other triggering event. The items in this zero tolerance category are:

  • Fees paid to the creditor, mortgage broker, or affiliate of either;
  • Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a required service and had to use the service provider of the creditor; and
  • Transfer taxes.

If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the permissible applicable tolerance threshold, the creditor is required to refund the excess to the consumer no later than 60 days after consummation and deliver or place in the mail to the consumer a corrected Closing Disclosure that reflects the refund.

For zero tolerance charges, any amount charged beyond the amount disclosed on the Loan Estimate must be refunded to the consumer. With regard to the 10% tolerance charges, to the extent that the total sum of the charges added together exceeds the sum of all such charges disclosed on the Loan Estimate by more than 10%, the difference must be refunded to the consumer.

 

(Part 1. Part 2. Part 3. Part 4. Part 5)

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on July 21, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.