Zero-tolerance charges are closing fees that generally cannot increase from the Loan Estimate unless a valid changed circumstance supports a revision.
Zero-tolerance charges are closing fees that generally cannot increase from the Loan Estimate unless a valid Changed Circumstance supports a revision.
Zero-tolerance charges matter because they help borrowers judge whether the costs on the final disclosure stayed within the allowed range.
It also matters because borrowers often treat every fee increase the same. In reality, disclosure rules sort fees into categories with different limits, and zero-tolerance items are the strictest category.
Borrowers encounter zero-tolerance issues when comparing the Loan Estimate with the Closing Disclosure.
The term becomes practical at the end of the transaction, when the borrower wants to know whether an increase should stand or whether the lender owes an adjustment.
A lender quoted a charge on the Loan Estimate that falls into the strictest tolerance category, but the fee is higher at closing without a valid revised disclosure basis. That situation raises a zero-tolerance issue.
Zero-tolerance charges differ from a Changed Circumstance because changed circumstance explains when a revision may be allowed, while zero-tolerance charges describe the fee category that normally cannot rise.
They also differ from a Tolerance Cure, which is the correction after the lender has to fix an overage.