What is required for a fee to be under the 10% good faith tolerance?

A fee must be under the 10% good faith tolerance when the member is allowed to choose from the credit union's written list of service providers. This refers to the provisions established under the Real Estate Settlement Procedures Act (RESPA), which aims to protect consumers in the home buying process by requiring transparency in the settlement services provided by lenders.

When a borrower is provided with a list of approved providers, they have the option to select services such as title insurance or appraisal from those listed companies or individuals. This choice ensures that the borrower can shop for services, which promotes competition and may lead to lower costs. If the borrower selects a provider from the credit union's specified list, the fees associated with those services fall under the 10% tolerance rule, allowing for minor variances in the cost of settlement services without violating the disclosure requirements.

The other options do not accurately reflect the conditions necessary for a fee to qualify under the 10% good faith tolerance. Fees do not necessarily need to be related to interest rates, nor do they need to be fixed and non-negotiable. Furthermore, while certain fees may be paid directly to the credit union, this aspect is not a criterion for good faith tolerance compliance.