Can you believe that title? The CFPB has actually published something for us in writing in the Federal Register that will clear up an item that has been a source of confusion since prior to the implementation of TRID.
The publication in the Federal Register dated yesterday, February 10th, results in a correction to the Supplementary Information of the final rule to correct a typographical error. Specifically, section 1026.19(e)(3)(iii) – Variations Permitted for Certain Charges is the section that is impacted by this correction.
Section 1026.19(e)(3)(iii) allows for certain charges to have permitted variations and not be subject to a tolerance limitation. These types of charges include: prepaid interest; property insurance premiums; amounts placed into escrow, impound, reserve, or similar account; charges paid to a third-party service provider selected by the consumer not on the settlement service provider list; and charges paid for third-party services not required by the creditor.
The supplementary information included in the final rule (published November 20, 2013) included a paragraph that stated:
Finally, as noted above, a number of the commenters sought clarification on various other aspects of the proposal. As is currently the case under Regulation X, final § 1026.19(e)(3)(iii) provides that property insurance premiums are included in the category of settlement charges not subject to a tolerance, whether or not the insurance provider is a lender affiliate. The final rule also mirrors current Regulation X in that property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees are subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account.
This one bold sentence above has caused a host of confusion since the implementation of TRID, especially considering it directly conflicts with the sentence right before it. The publication released in the Federal Register states that the correction will revise this statement in the Supplementary Information from “are subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account” to read “are not subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account. This link will provide the revision published by CFPB.
Amazing the power that one little word can make in lending compliance!