Tolerance levels and cures

Three buckets, two tolerances, and one distinction that decides which bucket a charge falls into.

Zero tolerance

These charges may not increase from the Loan Estimate to the Closing Disclosure at all.

• Fees paid to the creditor or a mortgage broker
• Fees for a service the consumer cannot shop for
• Transfer taxes

The logic is that these are within the creditor's knowledge or control, so getting them wrong is the creditor's problem. No increase at all.

Ten percent cumulative tolerance

These may increase, but only by 10 percent in aggregate rather than individually.

• Recording fees
• Charges for third-party services the consumer may shop for, where the provider is on the creditor's written list

Cumulative is the word doing the work. One fee can rise by more than 10 percent as long as the group does not.

What a cure is

When a tolerance is exceeded, the creditor refunds the excess to the consumer and delivers a corrected Closing Disclosure.

The refund is not optional and it is not a matter of negotiation. The rule assigns the cost of a bad estimate to the party that made it. That is the whole design.

Valid changes of circumstance

A revised Loan Estimate is not a general reset button. Regulation Z permits revised estimates only for specified events, and the new estimate affects the charges linked to the qualifying event. The creditor must document the reason and meet the redisclosure deadline.

A valid reason can include an extraordinary or unexpected event; consumer or transaction information that was inaccurate, changed, or newly learned; a change requested by the consumer; a change in eligibility tied to creditworthiness or collateral value; a rate lock that changes rate-dependent terms; expiration of the estimate after the applicable intent-to-proceed period; or a qualifying delayed closing on new construction when the original disclosure reserved that right. A creditor cannot revise an estimate just because it underpriced a service or wants to cure its own inaccurate estimate.

• When sufficient information establishes a permitted reason, the creditor generally must provide the revised disclosure within three business days.
• A revised Loan Estimate cannot be issued on or after the date the Closing Disclosure is provided. A revised estimate also must be received no later than four business days before consummation; delivery by mail carries a three-business-day receipt presumption unless earlier receipt is established.
• For a consumer-requested change, revise only when the request changes a disclosed term or settlement charge and the applicable rule permits the revision.
• For an unlocked rate, a later rate lock can change the rate, points, lender credits, and other rate-dependent charges; issue the required revised disclosure within the rule's deadline.
• For a new-construction transaction expected to close more than 60 days after the original Loan Estimate, later revisions based on the delayed settlement date require the original disclosure to clearly and conspicuously reserve that right.

The APR tolerances are separate

Do not confuse fee tolerances with APR accuracy. The APR is treated as accurate within 0.125 percent on a regular transaction and 0.25 percent on an irregular one, and exceeding that is what triggers a new three-business-day wait.