In which scenario does a fee fall under the zero tolerance category?

A fee falls under the zero tolerance category when the provider is not chosen by the borrower. In this context, the zero tolerance rule, as set forth by the Real Estate Settlement Procedures Act (RESPA), states that certain fees cannot increase from the original estimate provided to the borrower. When a borrower does not choose a service provider, such as a title company or closing attorney, the lender must ensure that the fee for that service remains exactly as disclosed in the loan estimate, with no allowance for increase. This regulation is intended to protect consumers by ensuring transparency and predictability in the costs associated with obtaining a mortgage.

In contrast, if a fee is disclosed later, it may not fall under zero tolerance guidelines, as the borrower has potentially not been given prior knowledge of the fee. Negotiable fees imply that there is flexibility in pricing, which permits changes based on agreement between the parties. Finally, fees for services provided prior to closing may have different tolerance levels or regulations that do not apply the same way as those under zero tolerance.