[Mary Frances]

Happy Friday and Happy 3-Day Weekend!

We have a secondary market loan that we are getting a tolerance cure because of the property taxes in Section F (prepaids). The loan was disclosed in July with an anticipated closing in August therefore the 1st payment would have been before the property taxes were due so the LE did not disclose the property taxes in Section F. We are now closing in September and the 1st payment will be in November so we have put the property taxes in Section F on the CD because they will be due before the 1st payment. Since the property taxes were not disclosed on the LE we are getting a tolerance cure. I have read 1026.19(e)(3)(iii) and I don’t think we are out of tolerance because we disclosed based on the best information available at the time of disclosing the LE. Which the information we had available at that time of disclosing the LE was the loan would close in August and the 1st payment would be before the property taxes are due. Am I missing something? Can someone point me to another section of the Reg. that talks about this?

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[rcooper]

I would agree that this would not be a violation of tolerance based on comment 1026.19(e)(3)(iii)-3 which states:
3. Good faith requirement for non-required services chosen by the consumer. Differences between the amounts of estimated charges for services not required by the creditor disclosed pursuant to § 1026.19(e)(1)(i) and the amounts of such charges paid by or imposed on the consumer do not constitute a lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. For example, if the consumer informs the creditor that the consumer will obtain a type of inspection not required by the creditor, the creditor must include the charge for that item in the disclosures provided pursuant to § 1026.19(e)(1)(i), but the actual amount of the inspection fee need not be compared to the original estimate for the inspection fee to perform the good faith analysis required by § 1026.19(e)(3)(iii). The original estimated charge, or lack of an estimated charge for a particular service, complies with § 1026.19(e)(3)(iii) if it is made based on the best information reasonably available to the creditor at the time that the estimate was provided. But, for example, if the subject property is located in a jurisdiction where consumers are customarily represented at closing by their own attorney, even though it is not a requirement, and the creditor fails to include a fee for the consumer’s attorney, or includes an unreasonably low estimate for such fee, on the original estimates provided pursuant to § 1026.19(e)(1)(i), then the creditor’s failure to disclose, or under-estimation, does not comply with § 1026.19(e)(3)(iii).

I believe you may have had a changed circumstance under 1026.19(e)(3)(iv)(A)(ii) that would have allowed you to re-disclose and reflect the property taxes.

[Mary Frances]

Thanks Robin. That was our thought … as a follow up question. Do the property taxes fall into a tolerance category? If so, which category? We can not find anything in the regulation and we want to correctly inform our officers and processors.

[Author]

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