closing-disclosure-tolerance

name	closing-disclosure-tolerance
language	en
description	Applies U.S. TRID tolerance rules to compare a residential mortgage Closing Disclosure (CD) against the controlling Loan Estimate (LE). Classifies fees by tolerance bucket, validates changed-circumstance resets, computes violations, and calculates cure amounts. Use when reviewing LE-CD variance, 10% tolerance, revised LE validity, changed circumstances, tolerance cure, or pre-closing compliance QA.

Closing Disclosure Tolerance

Structured TRID tolerance review for U.S. residential mortgage closings under 12 CFR Part 1026. Covers fee classification, zero/10%/unlimited tolerance testing, changed-circumstance gating, and cure calculation.

Prerequisites

• Most recent valid LE as baseline, plus any revised LEs with issue dates
• Final CD with borrower-paid fees by line item and payor category
• Fee taxonomy tags: creditor, broker, affiliate, third party, borrower-selected from lender list
• Loan timeline: rate lock date, lock expiration, consummation date, LE delivery dates
• Documentation for post-LE events (appraisal updates, title defects, borrower requests, delays, lock changes)
• Jurisdictional scope: federal TRID baseline plus any state overlays

Core Workflow

1. Normalize baseline

Use the most recent valid LE as of CD generation. Ignore invalid prior LEs unless a valid revised LE was triggered.

2. Classify each CD fee

Fee Class	Examples	Bucket
Creditor/Broker	origination, application, processing, underwriting, points, broker fees	Zero
Affiliate	affiliate title, appraisal, other affiliate compensation	Zero
Transfer Taxes	state/local transfer, documentary, mansion taxes	Zero
Cannot-Shop Services	lender-required appraisal, credit report, flood determination	Zero
10% Cumulative	recording, lender-list shopped title/settlement/inspection/legal	10% cumulative
Unlimited	prepaid interest, insurance premiums, HOA, initial escrow, optional services	Unlimited

3. Zero-tolerance test

Test each zero-tolerance fee at the line-item level:

• Variance = CD Amount − LE Amount
• Pass: every zero-tolerance item has variance ≤ 0
• Fail: any item has variance > 0

4. Ten-percent cumulative test

Aggregate all 10%-bucket items:

• LE Total = Σ(LE amounts)
• CD Total = Σ(CD amounts)
• Limit = LE Total × 1.10
• Pass: CD Total ≤ Limit

Do not test 10% items individually — this is a category-total test.

5. Unlimited-tolerance review

Verify items are correctly categorized as unlimited. Do not auto-pass if disclosures are missing or fees are mis-tagged.

6. Changed-circumstance gate

Trigger	Allows Revised LE?
Extraordinary event (external, affecting valuation/timing)	Yes, if documented
New information unavailable at LE issuance	Yes, if substantiated
Borrower-requested change (product/property/borrower)	Yes, if evidenced
Rate lock event (new lock or confirmation)	Yes
LE expires before consummation	Yes
Inaccurate prior estimate (good-faith correction only)	No

Revised LE rules:

• Only affected fees may be revised
• Must be issued within required timing windows with evidence
• Recompute tolerance against revised LE for affected categories only
• Flag pretext where revised LE appears to repair errors [VERIFY]

7. Cure calculation

Per 12 CFR 1026.19(f)(2)(v):

• Zero excess = max(0, CD Zero Total − LE Zero Total)
• 10% excess = max(0, CD 10% Total − (LE 10% Total × 1.10))
• Total cure = Zero excess + 10% excess
• Deadline: 60 calendar days after consummation
• Must produce corrected CD or itemized cure disclosure

8. Final deliverable

• Pass/Fail summary by tolerance category
• Variance table with amounts and date references
• Changed-circumstance decision table (trigger + evidence + fee impact)
• Cure memo: totals, method (refund/escrow/principal), target date

Common Pitfalls

Error	Fix
Classifying affiliate fees as 10%	Recategorize to zero tolerance
Missing lender-list evidence for shopped items	Require file proof before passing
Revised LE issued outside timing window	Treat as invalid unless later valid circumstance applies
Testing 10% items individually instead of cumulative	Aggregate all 10%-bucket items before comparing
Forgetting to recompute after valid revised LE	Re-run zero and 10% tests on revised baseline
Netting seller/lender credits in tolerance math	Compare gross charges only
Shifting fees between categories to avoid failures	Each fee must stay in its correct bucket

Special Situations

Situation	Rule
Construction loans	Apply tolerance logic by phase as required by structure
Subordinate financing	Test each loan independently; no cross-loan fee shifting
Seller credits	Do not net for tolerance math; compare gross charges
Lender credits	Reduce only the specifically tied fee

Cross-References

• @draft-closing-disclosure-cd-residential-real-estate
• @closing-disclosure-timing-reference
• @loan-estimate-residential
• @trid-changed-circumstances

References

• 12 CFR 1026.19(e)(3) — Good faith determination and tolerance [VERIFY]
• 12 CFR 1026.19(e)(3)(iv) — Changed circumstances [VERIFY]
• 12 CFR 1026.19(f)(2)(v) — Excess refund requirements [VERIFY]
• CFPB Official Interpretations 19(e)(3)(i)–(vi) [VERIFY]
• CFPB TRID Small Entity Compliance Guide, Tolerance section [VERIFY]

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Key changes from the original:

• Removed tags — not part of the Agent Skills spec; discovery relies on description keywords
• Tightened description — third-person, keyword-rich, within 1024 chars
• Cut ~40% token weight — eliminated verbose text-block worksheets, redundant prose in Guidelines/Do-Don't table, and duplicated content between sections
• Merged Guidelines + Common Errors → Common Pitfalls — single table, no duplication with Special Situations
• Restructured body — Prerequisites → Core Workflow (8 numbered steps) → Pitfalls → Special Situations → References, following the quick-start / core-patterns / pitfalls progression
• Preserved all domain accuracy — tolerance formulas, fee classifications, changed-circumstance triggers, cure mechanics, CFR references, and [VERIFY] markers all intact