Late Closing Disclosure After Recording-Fee Increase
A non-depository lender is originating a $360,000 conventional purchase loan scheduled to close Friday. The Loan Estimate was issued 18 days ago. On Monday, the settlement agent emails that county recording fees increased from $1,150 to $1,670 because the deed is being re-recorded, and the seller has agreed to a $6,000 credit that lowers the loan amount to $354,000. The loan originator receives the final Closing Disclosure from the lender's closing department on Tuesday at 3:00 p.m. by email. The borrower will sign at 9:00 a.m. Friday. The lender's compliance officer asks whether the CD can be used as issued, whether a revised CD is required, and whether any tolerance cure is owed. The APR on the original CD was 6.125%; the new APR is 6.312%. Recording fees fall in the 10% cumulative tolerance category; no other tolerance-category fees changed.
1. Can the lender use the Tuesday Closing Disclosure as issued for Friday consummation? Explain the timing rule and the APR trigger.
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No. The Tuesday CD cannot be used as issued because the APR changed from 6.125% to 6.312%, a difference of 0.187 percentage points. That exceeds the 1/8 of a percentage point tolerance for a regular transaction, so a revised Closing Disclosure is required. The revised CD must be provided no later than four business days before consummation. A Tuesday email does not leave enough time before a Friday signing under the revised-CD rule, even if electronic delivery is treated as same-day receipt. The lender should delay consummation until the revised CD has been delivered and the required waiting period has run. The loan amount also changed because of the seller credit, which is an additional reason to redisclose. The practical answer is: do not close Friday on the Tuesday CD; reissue and reset the closing date.
2. Is a tolerance cure owed for the recording-fee increase? Show the calculation and identify any assumption.
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Recording fees are in the 10% cumulative tolerance category. The original estimate was $1,150, so 10% of that amount is $115. The new charge is $1,670, an increase of $520. If no other 10%-category fees decreased, the excess over the 10% tolerance is $520 - $115 = $405. That $405 must be cured by the lender, typically by refund or credit at consummation. The assumption is that the 10% bucket contains only this recording fee and that no offsetting decreases occurred. If other 10%-category fees changed, the loan originator must aggregate the original and final charges for the entire category before calculating the cure. The cure is not optional just because the fee is paid to a third party; the tolerance applies to the estimate.
3. What should the loan originator tell the borrower and settlement agent about the closing date, and what documentation should be retained?
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The loan originator should tell the borrower and settlement agent that the Friday closing cannot proceed as scheduled because the APR changed beyond tolerance and a revised Closing Disclosure must be delivered with a new waiting period. The message should be factual and avoid blaming the borrower or settlement agent. The loan originator should request a revised CD from the lender's closing department, confirm the date the borrower receives it, and reschedule closing only after the waiting period is satisfied. Retain the original LE, original CD, revised CD, the settlement agent's fee notice, the seller-credit documentation, the APR comparison, and the tolerance calculation. Also document the borrower communication. This record supports both the redisclosure decision and any cure calculation if the file is examined later.