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cd-tolerance-reference

Guides the agent through TRID tolerance compliance under 12 CFR § 1026.19(e)(3), comparing Closing Disclosure fees to Loan Estimate fees across zero, 10% cumulative, and unlimited tolerance categories. Use when reviewing a CD for tolerance variances, determining whether a revised LE is permitted, calculating cure amounts, or resolving post-closing tolerance violations.

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TRID CD Tolerance Reference

Determines whether CD fees comply with TRID tolerance limits set by the most recent valid LE, and calculates any required cure.

Prerequisites

  • Most recent valid LE (original or revised) with line-item fees
  • Final CD with line-item fees
  • Lender's written list of service providers (classifies shopped services)
  • Documentation of any changed circumstances supporting a revised LE

Tolerance Categories

Authority: 12 CFR § 1026.19(e)(3). Always compare CD fees to the most recent valid LE.

| Category | Rule | Measurement | |----------|------|-------------| | Zero | Cannot increase at all | Per item | | 10% Cumulative | CD category total ≤ LE total × 110% | Aggregate | | Unlimited | May change freely (good faith at LE required) | None |

Zero Tolerance (0%)

Any increase from LE to CD is a violation requiring cure.

| Category | Examples | |----------|---------| | Creditor/broker fees | Origination, application, underwriting, processing, discount points, commitment, rate lock | | Affiliate fees | Any fee to entity affiliated with creditor/broker | | Transfer taxes | State/local transfer taxes, mansion tax, documentary stamps | | Services borrower cannot shop | Appraisal (creditor-selected), credit report, flood determination, tax monitoring |

Compliant: every item variance ≤ $0. Any positive variance = cure amount.

10% Cumulative Tolerance

Measured as category aggregate, not per item.

| Category | Examples | |----------|---------| | Recording fees | Deed recording, mortgage recording, other recording | | Shopped services from lender's list | Title policies, title search, settlement/closing fee, notary, survey, pest inspection, settlement attorney |

If borrower chose a provider not on lender's written list, that fee moves to unlimited tolerance.

Cure calculation:

  • Maximum permitted = LE total × 110%
  • Excess = CD total − maximum permitted (if positive)

Unlimited Tolerance

No cure required. Includes:

  • Prepaid interest, insurance premiums (homeowner's, flood, hazard)
  • Initial escrow deposits (taxes, insurance, MIP, aggregate adjustment)
  • Property costs not required by creditor (prepaid taxes, HOA)
  • Services where borrower chose provider off lender's list
  • Optional services (home warranty, optional owner's title, non-required inspections)

Changed Circumstances

A valid changed circumstance permits a revised LE that resets tolerances for affected fees only. Per 12 CFR § 1026.19(e)(3)(iv):

  • Deliver revised LE within 3 business days of learning of the change
  • At least 4 business days before consummation

| Type | Examples | |------|---------| | Extraordinary event | Natural disaster, war, civil unrest | | Information inaccuracy | Income/assets differ; property differs from disclosed | | Previously unavailable info | Title defect, survey encroachment | | Borrower-requested change | Different product, property, or added borrower | | Rate lock | Borrower locks after floating | | LE expiration | Closing delayed beyond 10 business days after LE |

Invalid reasons: creditor error, market fluctuation, processing delays, simple underestimates, bad-faith original estimate.

Cure Requirements

Authority: 12 CFR § 1026.19(f)(2)(v). All within 60 calendar days after consummation:

  1. Refund excess amount to borrower
  2. Provide corrected CD reflecting the cure
  3. Document cure in loan file

| Category | Maximum Permitted | Cure | |----------|-------------------|------| | Zero tolerance | = LE amount | CD − LE (if positive) | | 10% cumulative | = LE total × 110% | CD total − max permitted (if positive) |

Pitfalls

| Mistake | Correction | |---------|-----------| | Testing 10% items individually | Measure as cumulative category total | | Applying 10% to affiliate fees | Affiliate fees are zero tolerance | | Changed circumstance increasing unrelated fees | Only revise affected fees | | Revised LE > 3 business days after learning of change | Must issue within 3 business days | | Comparing net fees after credits | Compare gross fees; credits don't affect tolerance | | Missing 60-day cure deadline | Calendar from consummation date |

Key Rules

  • Seller credits don't affect tolerance — always compare gross fees
  • Specific lender credits tied to a fee reduce it for tolerance; general credits do not
  • Construction loans: tolerances apply separately per phase
  • Subordinate financing: each loan has independent tolerances; no fee-shifting between loans
  • Always verify affiliate status — misclassification as 10% item is a common exam finding

References

  • 12 CFR § 1026.19(e)(3) — Tolerance categories
  • 12 CFR § 1026.19(e)(3)(iv) — Changed circumstances
  • 12 CFR § 1026.19(f)(2)(v) — Cure requirements
  • CFPB Official Interpretation, Comments 19(e)(3)(i)-1 through -6
  • CFPB Official Interpretation, Comments 19(e)(3)(iv)-1 through -6
  • CFPB TRID Small Entity Compliance Guide, Section 7