First Guaranty Mortgage Corporation - Compliance Department



What is the general accuracy requirement for the Loan Estimate disclosures?

Creditors are responsible for ensuring that the figures stated in the Loan Estimate are made in good faith and consistent with the best information reasonably available to the creditor at the time they are disclosed. (§ 1026.19(e)(3); Comment 19(e)(3)(iii)-1 through -3)

Whether or not a Loan Estimate was made in good faith is determined by calculating the difference between the estimated charges originally provided in the Loan Estimate and the actual charges paid by or imposed on the consumer in the Closing Disclosure. (§ 1026.19(e)(3)(i) and (ii))

Generally, if the charge paid by or imposed on the consumer exceeds the amount originally disclosed on the Loan Estimate it is not in good faith, regardless of whether the creditor later discovers a technical error, miscalculation, or underestimation of a charge.

However, a Loan Estimate is considered to be in good faith if the creditor charges the consumer less than the amount disclosed on the Loan Estimate, without regard to any tolerance limitations.

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.1


Are there circumstances where creditors are allowed to charge more than disclosed on the Loan Estimate? 

Yes.  A creditor may charge the consumer more than the amount disclosed in the Loan Estimate in specific circumstances, described below:
  • Certain variations between the amount disclosed and the amount charged are expressly permitted by the TILA-RESPA rule (See section 7.3 below for additional information on which variations are possible) (§ 1026.19(e)(3)(iii));
  • The amount charged falls within explicit tolerance thresholds (and the estimate is not for a zero tolerance charge where variations are never permitted) (§ 1026.19(e)(3)(ii)) (See sections 7.5 and 7.10 below); or
  • Changed circumstances permit a revised Loan Estimate or a Closing Disclosure that permits the charge to be changed. (§ 1026.19(e)(3)(iv)) (See section 8.2 below)
Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.2


What charges may change without regard to a tolerance limitation?

For certain costs or terms, creditors are permitted to charge consumers more than the amount disclosed on the Loan Estimate without any tolerance limitation.

These charges are:
  • Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account. (§ 1026.19(e)(3)(iii)(A)-(C))
  • For services required 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. (§ 1026.19(e)(3)(iii)(D))
  • Charges paid to third-party service providers for services not required by the creditor (may be paid to affiliates of the creditor). (§ 1026.19(e)(3)(iii)(E))
However, creditors may only charge consumers more than the amount disclosed when the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. (§ 1026.19(e)(3)(iii))

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.3


When is a consumer permitted to shop for a service?

In addition to the Loan Estimate, if the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame — that is, it must be provided to the consumer no later than three business days after the creditor receives the consumer’s application — and the list must:
  • Identify at least one available settlement service provider for each service; and
  • State that the consumer may choose a different provider of that service. (§ 1026.19(e)(3)(ii)(C) and (e)(1)(vi)(C))
The settlement service providers identified on the written list must correspond to the settlement services for which the consumer can shop as disclosed on the Loan Estimate. See form H-27(A) of appendix H to Regulation Z for a model list. (Comment 19(e)(1)(vi)-3)

The creditor may also identify on the written list of providers those services for which the consumer is not permitted to shop, as long as those services are clearly and conspicuously distinguished from those services for which the consumer is permitted to shop. (Comment 19(e)(1)(vi)-6). See form H-27(C) of appendix H to Regulation Z for a sample of the inclusion of this information.

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.4


What charges are subject to a 10% cumulative tolerance?

Charges for third-party services and recording fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%. (§ 1026.19(e)(3)(ii))

These charges are:
  • Recording fees (Comment 19(e)(3)(ii)-4);
  • Charges for third-party services where:
    • The charge is not paid to the creditor or the creditor’s affiliate (§ 1026.19(e)(3)(ii)(B)); and
    • The consumer is permitted by the creditor to shop for the third-party service, and the consumer selects a third-party service provider on the creditor’s written list of service providers. (§ 1026.19(e)(3)(ii)(C); § 1026.19(e)(1)(vi); Comment 19(e)(1)(vi)-1 through 7)).
Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.5


What if the creditor estimates a charge for a service that is not actually performed?

The creditor should compare the sum of the charges actually paid by or imposed on the consumer with the sum of the estimated charges on the Loan Estimate that are actually performed. If a service is not performed, the estimate for that charge should be removed from the total amount of estimated charges.

Source:  Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 7.7”



 
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