May 4, 2015 at 2:30 pm EDT #6863kowsleyMember
I am running up against one item in Integrated Disclosures that I am struggling to work through and could use some guidance.
Initially, when a creditor completes a Loan Estimate they determine which services the borrower can shop for and those they can’t. Those services the borrower can shop for allows them to be disclosed in Block C under Loan Costs on Page 2 of the LE; in turn the borrower should receive a “shopping list” from the creditor to be able to select a service provider off of the list if they choose to do so. By categorizing these fees in Block B, the creditor is provided a 10% tolerance requirement since allowing the borrower to shop for these services.
If the borrower chooses a servicer directly from the “shopping list”, the regulation states that the fee should then be moved to Block B under Loan Costs on page 2 of the Closing Disclosure – Services Borrower Did Not Shop For because the borrower didn’t technically “shop”. How does this impact tolerance? Is the creditor still subject to the 10% tolerance even though the fee “switched blocks” from the Loan Estimate to the Closing Disclosure? or is there no tolerance?
Any guidance is appreciated! I believe I have looked at it too long! Thanks.May 6, 2015 at 10:05 am EDT #6871rcooperMember
*Kowsley – I’m not sure if this answers your question. If it doesn’t let me know.*
If the consumer is allowed to shop and is given a list of settlement service providers and the borrower then chooses a provider from that list or doesn’t choose one at all then the fee would be included under “Loan Costs/Block B” and subject to the 10% tolerance.
If the consumer is allowed to shop and is given a list of settlement service providers but chooses a provider that is not on the list then the fee would be included under “Loan Costs/Block C” and would not be subject to a tolerance.
Comment 19(3)(ii)-3 gives a good example:
If, in the disclosures provided pursuant to §§ 1026.19(e)(1)(i) and 1026.37(f)(3), a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to § 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of § 1026.19(e)(3)(ii). If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to § 1026.19(e)(3)(iii).
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