When is an MLO or company not liable under the 10% tolerance rule?

The 10% tolerance rule refers to the limitations on the amount by which certain fees can change from the time the Loan Estimate is provided to the closing of the loan. An MLO or company is not liable under the 10% tolerance rule when the borrower selects their own title or inspection company because this choice is a direct decision made by the borrower. In this case, the lender's control over that specific fee is diminished, which allows the lender to avoid liability for any deviation in costs that may occur as a result of the borrower's selection.

In instances where the borrower chooses their own service providers, the lender is not responsible for any increase in fees associated with those services, therefore negating any potential breach of the 10% tolerance guideline. This emphasizes the importance of the borrower's agency in making choices regarding the third-party services that impact their loan costs.

Other scenarios, such as the borrower's inexperience or a reduction in rate, do not exempt the MLO or company from liability under the tolerance rule. Additionally, the loan amount being less than $50,000 does not provide immunity from compliance with the 10% tolerance rule, as the rule applies uniformly to loans just below or above that threshold.