How is a 10% tolerance determined in the context of borrower fees?

The 10% tolerance is determined by comparing quoted title or lender-required inspection fees to actual costs because this approach specifically addresses how certain charges can vary between the Loan Estimate and the Closing Disclosure. Under the TILA-RESPA Integrated Disclosure (TRID) rules, some fees are allowed to vary by a certain percentage, and the 10% tolerance applies to certain types of charges that are initially estimated for the borrower but can fluctuate to a limited extent by the time of closing.

This means that if the combined total of these specific fees (which can include lender-required services like title insurance or inspection fees) does not exceed 10% of the total quoted amount, then the borrower is protected from unexpected increases in those fees. This tolerance is designed to give borrowers an accurate estimate of costs while still allowing for some variability in what the final charges might be, as long as they remain within the specified limits.

In contrast, the other options do not directly address the mechanics of how tolerance is applied to borrower fees. For instance, calculating total fees at closing does not establish whether those fees fall within the acceptable percentage range. Assessing a borrower's credit score relates to loan eligibility and rates, but does not influence fee tolerances directly. Lastly, requiring