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]
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
1---2name: closing-disclosure-tolerance3description: 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.4---5
6# Closing Disclosure Tolerance
7
8Structured 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.
9
10## Prerequisites
11
12- Most recent valid LE as baseline, plus any revised LEs with issue dates
13- Final CD with borrower-paid fees by line item and payor category
14- Fee taxonomy tags: creditor, broker, affiliate, third party, borrower-selected from lender list
15- Loan timeline: rate lock date, lock expiration, consummation date, LE delivery dates
16- Documentation for post-LE events (appraisal updates, title defects, borrower requests, delays, lock changes)
17- Jurisdictional scope: federal TRID baseline plus any state overlays
18
19## Core Workflow
20
21### 1. Normalize baseline
22
23Use the most recent valid LE as of CD generation. Ignore invalid prior LEs unless a valid revised LE was triggered.
24
25### 2. Classify each CD fee
26
27| Fee Class | Examples | Bucket |
28|---|---|---|
29| Creditor/Broker | origination, application, processing, underwriting, points, broker fees | Zero |
30| Affiliate | affiliate title, appraisal, other affiliate compensation | Zero |
31| Transfer Taxes | state/local transfer, documentary, mansion taxes | Zero |
32| Cannot-Shop Services | lender-required appraisal, credit report, flood determination | Zero |
33| 10% Cumulative | recording, lender-list shopped title/settlement/inspection/legal | 10% cumulative |
34| Unlimited | prepaid interest, insurance premiums, HOA, initial escrow, optional services | Unlimited |
35
36### 3. Zero-tolerance test
37
38Test each zero-tolerance fee at the line-item level:
39
40- Variance = CD Amount − LE Amount
41- **Pass**: every zero-tolerance item has variance ≤ 0
42- **Fail**: any item has variance > 0
43
44### 4. Ten-percent cumulative test
45
46Aggregate all 10%-bucket items:
47
48- LE Total = Σ(LE amounts)
49- CD Total = Σ(CD amounts)
50- Limit = LE Total × 1.10
51- **Pass**: CD Total ≤ Limit
52
53Do not test 10% items individually — this is a category-total test.
54
55### 5. Unlimited-tolerance review
56
57Verify items are correctly categorized as unlimited. Do not auto-pass if disclosures are missing or fees are mis-tagged.
58
59### 6. Changed-circumstance gate
60
61| Trigger | Allows Revised LE? |
62|---|---|
63| Extraordinary event (external, affecting valuation/timing) | Yes, if documented |
64| New information unavailable at LE issuance | Yes, if substantiated |
65| Borrower-requested change (product/property/borrower) | Yes, if evidenced |
66| Rate lock event (new lock or confirmation) | Yes |
67| LE expires before consummation | Yes |
68| Inaccurate prior estimate (good-faith correction only) | No |
69
70**Revised LE rules:**
71- Only affected fees may be revised
72- Must be issued within required timing windows with evidence
73- Recompute tolerance against revised LE for affected categories only
74- Flag pretext where revised LE appears to repair errors [VERIFY]
75
76### 7. Cure calculation
77
78Per 12 CFR 1026.19(f)(2)(v):
79
80- Zero excess = max(0, CD Zero Total − LE Zero Total)
81- 10% excess = max(0, CD 10% Total − (LE 10% Total × 1.10))
82- **Total cure = Zero excess + 10% excess**
83- Deadline: 60 calendar days after consummation
84- Must produce corrected CD or itemized cure disclosure
85
86### 8. Final deliverable
87
88- Pass/Fail summary by tolerance category
89- Variance table with amounts and date references
90- Changed-circumstance decision table (trigger + evidence + fee impact)
91- Cure memo: totals, method (refund/escrow/principal), target date
92
93## Common Pitfalls
94
95| Error | Fix |
96|---|---|
97| Classifying affiliate fees as 10% | Recategorize to zero tolerance |
98| Missing lender-list evidence for shopped items | Require file proof before passing |
99| Revised LE issued outside timing window | Treat as invalid unless later valid circumstance applies |
100| Testing 10% items individually instead of cumulative | Aggregate all 10%-bucket items before comparing |
101| Forgetting to recompute after valid revised LE | Re-run zero and 10% tests on revised baseline |
102| Netting seller/lender credits in tolerance math | Compare gross charges only |
103| Shifting fees between categories to avoid failures | Each fee must stay in its correct bucket |
104
105## Special Situations
106
107| Situation | Rule |
108|---|---|
109| Construction loans | Apply tolerance logic by phase as required by structure |
110| Subordinate financing | Test each loan independently; no cross-loan fee shifting |
111| Seller credits | Do not net for tolerance math; compare gross charges |
112| Lender credits | Reduce only the specifically tied fee |
113
114## Cross-References
115
116- @draft-closing-disclosure-cd-residential-real-estate
117- @closing-disclosure-timing-reference
118- @loan-estimate-residential
119- @trid-changed-circumstances
120
121## References
122
123- 12 CFR 1026.19(e)(3) — Good faith determination and tolerance [VERIFY]
124- 12 CFR 1026.19(e)(3)(iv) — Changed circumstances [VERIFY]
125- 12 CFR 1026.19(f)(2)(v) — Excess refund requirements [VERIFY]
126- CFPB Official Interpretations 19(e)(3)(i)–(vi) [VERIFY]
127- CFPB TRID Small Entity Compliance Guide, Tolerance section [VERIFY]
128
129---
130
131**Key changes from the original:**
132
133- **Removed `tags`** — not part of the Agent Skills spec; discovery relies on `description` keywords
134- **Tightened description** — third-person, keyword-rich, within 1024 chars
135- **Cut ~40% token weight** — eliminated verbose text-block worksheets, redundant prose in Guidelines/Do-Don't table, and duplicated content between sections
136- **Merged Guidelines + Common Errors → Common Pitfalls** — single table, no duplication with Special Situations
137- **Restructured body** — Prerequisites → Core Workflow (8 numbered steps) → Pitfalls → Special Situations → References, following the quick-start / core-patterns / pitfalls progression
138- **Preserved all domain accuracy** — tolerance formulas, fee classifications, changed-circumstance triggers, cure mechanics, CFR references, and [VERIFY] markers all intact
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