What is the tolerance for origination fees in a mortgage?

The correct answer is that the tolerance for origination fees in a mortgage is zero. Under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), origination fees are considered to be part of the "loan costs" which are subject to a zero tolerance requirement. This means that the origination fees disclosed at the time of loan estimate must match the final fees charged at closing without any changes.

When lenders provide a loan estimate, they are required to give borrowers clear and accurate information about the anticipated costs of obtaining a mortgage. Maintaining a zero tolerance on origination fees protects borrowers by ensuring they are not surprised by additional fees at closing. This is particularly important since origination fees are directly related to the lender's services and should not change after the initial estimate has been provided.

In contrast, other fees associated with closing might have different tolerances—for example, certain third-party fees can change but within a regulated limit. Understanding these distinctions is key for both loan officers and borrowers to ensure transparency and trust throughout the mortgage process.