CFPB TRID Sec. 7 - What charges may change without regard to a tolerance limitation?

Compliance > Regulation Z - TILA / TRID Specific > Loan Estimates
Q:  What charges may change without regard to a tolerance limitation?
 
A:  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))
  • Property taxes and other charges paid to third-party service providers for services not required by 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)). Thus, these charges are subject to a “best information reasonably available” standard.
 
The charges listed above are permitted to increase, subject to the best information reasonably available standard, even if paid to the creditor or affiliate so long as they are bona fide. Bona fide charges are those that are lawful and for services actually performed. (Comment 19(e)(3)(iii)-4)
 
Property taxes and other charges paid to third-party service providers for services not required by the creditor are permitted to increase so long as the amount estimated (or omitted) for a particular service was based on the best information reasonably available at the time the creditor provided the disclosure. For example, if a creditor has reason to know that property taxes will be required at consummation, failure to estimate those taxes or providing an unreasonably low estimate of those taxes is not an estimate based on the best information reasonably available, and as a result, is subject to the zero tolerance standard. (Comment 19(e)(3)(iii)-3)
 
Note:  Bona fide, as used for tolerances under the TILA-RESPA Rule, may not mean the same thing as used in other places of Regulation Z or X. A creditor should check the respective definitions.
 
 
This Loan Estimate / LE information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 

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