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CFPB RESPA/TILA Rule Reference: 7.2-7.3; 7.5, page 34-36, CFPB Detailed summary of the rule
In our previous series of posts regarding the Loan Estimate form, we touched on tolerances and limitations. But to clarify further, this section of the TILA-RESPA rule details a bit more than we previously discussed. For instance, there are circumstances where charges on the Loan Estimate form may change without any violations to the “tolerance” thresholds.
In these instances, the creditors are allowed to charge more than disclosed on the Loan Estimate.
- The amount falls within a certain tolerance threshold
- Certain variations between the amount disclosed and the amount charged are expressly permitted by the TILA?RESPA rule
- Changed circumstances permit a revised Loan Estimate or a Closing Disclosure
Charges that may change without regard to a tolerance limitation:
- Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account
- Services by the creditor if the creditor permits the consumer to shop and the consumer selects a third-party service provider not on the creditor’s written list of service providers
- Charges paid to third-party service providers for services not required by the creditor
Charges that are subject to a 10% cumulative tolerance are:
- Recording fees
- Charges for third-party services where
— The charge is not paid by the creditor or the creditor’s affiliate; and
— The consumer is permitted by the creditor to shop, but selects a third-party service provider on the creditors' written list of service providers
*Key note: when the creditor allows the consumer to shop for a third-party settlement service and the consumer chooses a service provider that is not on their “written list,” the charge is not subject to a tolerance limitation.
These tolerance guidelines are already being used today; obviously, the big difference is the new Loan Estimate form. As such, this happens to be one area where there isn’t drastic change or major impacts on businesses. As long as businesses know their current limitations, they won’t have to worry about incurring any sort of fees for violations.
For more information about the impacts of TILA-RESPA on your business, and how technology solutions can help you overcome them, visit www.TILAPRESPA.com to view a growing knowledge base of information and forums where you can ask questions.
All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.