In terms of a 10% tolerance, when is the borrower liable for additional costs?

The borrower becomes liable for additional costs in a situation where fees for title or recording fees exceed the quoted amount because federal regulations, specifically under the Real Estate Settlement Procedures Act (RESPA), require disclosures to be made to the borrower ahead of closing. These disclosures must provide estimates of costs associated with the loan, which include title and recording fees.

If these actual costs at closing exceed the initial estimate by more than 10%, the borrower is responsible for this additional amount. This tolerance level is designed to protect borrowers from unexpected increases in fees, ensuring they are informed upfront about the potential costs associated with closing. On the other hand, tolerances do not apply in the same way for costs associated with items like inspections or adjustments in loan amounts, which is why those scenarios do not trigger liability for the borrower in the same manner as title or recording fees exceeding the quoted amount.