Basics for the Integrated Mortgage Disclosure Rule Changes Effective 8/1/15 – CFPB Update #4
TOLERANCE LEVELS UNDER THE NEW CFPB REGULATIONS
CB Title is committed to providing you with training and reference materials related to the new regulations and forms coming August 1st. Please see below for our fourth in a series of informational bulletins about the new CFPB regulations.
The concept of “tolerance levels” was introduced with the 2010 GFE and HUD-1. Under the CFPB rule, this concept is carried forward but some of the items falling within the “buckets” will be changed for loans falling under this rule.
Zero tolerance bucket – There can be no increase for any item in this bucket in the amount paid at closing over the estimated amount on the Loan Estimate form for borrower paid:
- Charges paid to the creditor and/or mortgage broker for their own fees, such as origination charges
- Transfer taxes
- Fees paid to an affiliate of the creditor or mortgage broker for a service required by the creditor (which is not a zero tolerance item under current HUD regulations)
- Fees paid to an unaffiliated service provider for a service required by the creditor if the borrower was not allowed to shop for the provider (which is not a zero tolerance item under current HUD regulations)
10% bucket – Charges for services that can increase – but by no more than 10% in the aggregate – are as follows:
- Fees paid to an third-party provider not affiliated with the creditor for a service required by the creditor if the creditor permitted the borrower to shop and the borrower still selected off the creditor’s provider list
- Recording fees paid by the borrower
Charges that can increase – The costs of items below can increase by an unlimited amount above the estimated amounts on the Loan Estimate:
- Prepaid interest
- Property insurance
- Amounts for escrow deposits (taxes, insurance)
- Fees paid to third-party providers selected by the borrower and not on the creditor’s list of providers
- Charges paid for third-party services not required by the creditor
The creditor can issue revised Loan Estimates after the initial Loan Estimate if a “changed circumstance” occurs. If a “changed circumstance” occurs causing an increase in charges above the applicable “tolerance level” the creditor must usually provide an updated Loan Estimate form within three business days after having knowledge of the change. Examples of “changed circumstances” permitting revisions in the Loan Estimate include:
- The consumer asks for a change
- Information provided in the application was inaccurate or has changed since the application
- New information as to the consumer or transaction is provided that the creditor had not relied on
- The Loan Estimate form expires
- Interest rate dependent charges (when the rate is locked by the consumer, creditor must provide revised Loan Estimate showing all such changed charges)
- Extraordinary event occurs beyond the control of any party
This bulletin is sent courtesy of CB Title Group, LLC and Stewart Title Insurance Company. This article is for informational purposes only and is not intended to provide legal advice, but rather to provide insight into legal developments and issues that may be useful to our clients and friends. In no circumstance is this article intended to be a full treatment of the above subject matter. Reader is advised to obtain additional information as noted.
