Under the current Regulation X, there are set tolerance levels for amounts listed on the Good Faith Estimate (GFE). The tolerance is the maximum amount that an actual charge can exceed the amount estimated on the GFE.
Regulation X provides three tolerance buckets that charges fit into: zero percent, 10 percent and charges that can change by any amount.
The zero percent bucket is where the lender’s costs go, including processing, underwriting and origination fees, along with transfer taxes. If a charge falls into the zero bucket, it means that the fee cannot increase from the amount that was estimated to the consumer, and if it does, the lender owes the consumer the difference between the estimated fee and the higher fee. The 10 percent bucket is for lender-required settlement services where the lender selects the provider, lender-required services and title services when the borrower uses a provider identified by the loan originator, and government charges. These are services the borrower can’t shop for, like the appraisal, credit report and flood determination fees.
In the final bucket go all other settlement services charges included on the GFE. These charges can change by any amount and would include escrows and homeowner association fees.
These tolerance levels will change significantly on Aug. 1, 2015, when the Consumer Financial Protection Bureau’s (CFPB) integrated RESPA/Truth in Lending Act mortgage disclosure forms final rule goes into effect.
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