Compliance question of the month: May the bank rely an amount disclosed on the initial Loan Estimate for tolerance comparison purposes?

I have a question regarding a potential tolerance cure under Regulation Z (Truth in Lending Act) regarding mortgage disclosures. Under §1026.19(e)(3), charges disclosed on the Loan Estimate (LE) must be disclosed in good faith based on the best information reasonably available. An estimated cost is disclosed in good faith if the charge paid or imposed on the consumer does not exceed the amount actually paid or disclosed by a certain tolerance threshold on the Closing Disclosure (CD).
An appraisal fee of $550 was disclosed on the original LE in good faith. A subsequent invoice for the appraisal was received for $450 and a revised LE was sent for informational purposes. Before the CD was issued, a revised appraisal invoice was received for $550. The bank disclosed $550 as the appraisal fee on the CD.
QMay the bank rely on the fee disclosed on the initial LE ($550) instead of the amount disclosed on the revised LE ($450) when reviewing for a tolerance cure?
AYes, the bank may rely on the amount disclosed on the initial LE.
While the question is not addressed in the regulation itself, the Bureau addressed it on page 50 in its TILA-RESPA Integrated Disclosure Rule small entity compliance guide.
“If a creditor decreases a charge on a revised Loan Estimate, Closing Disclosure, or corrected Closing Disclosure, the creditor is not required to use the decreased estimate for purposes of determining good faith, but instead may rely on the amount originally disclosed.”
For more information, contact ABA’s Rhonda Castaneda.
Please note that this section is not a substitute for professional legal advice.
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