[Jimmy.Graham]

Just looking for some guidance on this question: Mortgage loan has $2000 in total closing cost ( Appraisal $500, Title Insurance $500, Origination fee $500, Title Closing fee $500 ). We would consider two of these fees APR, origination & closing, and 2 NON-APR fees. Now…The seller has agreed to pay $1000 toward the buyers closing cost. My questions is…When preparing the CD, Is there guidance that says which two fees I MUST show as being paid by the seller and which two fees are shown in the borrowers column?? Is there an issue with moving the traditional APR fees to the seller column and leave the non APR in the borrowers column to show a lower APR on the CD? Thanks in advance for any input.

Topic

[rcooper]

You as the lender can not assign the lump sum credit to specific credits in order to reduce the APR.

If the seller is paying specific fees you would disclose those in the seller paid column.

If the seller credit is a general credit (not applicable to specific charge) it would be disclosed as lump sums per 38(j)(2)(v) and 38(k)(2)(vii).

[Jimmy.Graham]

Thank you for the response.

I am so confused on this. We sell all of our loans in the secondary market. 4 of our major investors require that we break out the seller paid closing cost into the seller column and not show it as a lump sum. They actually have made us send out post consummation CD’s before they will buy the loan. Could this be coming from any other Reg or guidance? If it was just one investor, I wouldn’t think much about it but it is several ( Nationstar, Ditech, Texas Capital Bank & Freedom Mortgage Group ). In your opinion, Are we out of compliance by showing the seller paid closing cost broken out in the seller column ( Currently, we assign non APR fees to that column to cover the credit )

[rcooper]

First off, we believe that general and specific lender credits should be disclosed on the closing disclosure as described in my previous reply.

As to which fees you apply a general credit, Regulation Z does not state that the lump sum must be applied to any particular fees. If a general credit will be covering a finance charge, and as a result the borrower isn’t obligated for that fee (see commentary below) you would exclude it from the APR. This is cleaner for specific credits where the fees is allocated toward specific fees. For general credits we believe the safest and most cautious approach would be to apply the general credit first to non-finance charges and then any remainder to the fees that are finance charges (which, from my understanding, is what you said you have typically done).

Regulation Z, Paragraph 4(c)(5)
1. Seller’s points. The seller’s points mentioned in §1026.4(c)(5) include any charges imposed by the creditor upon the noncreditor seller of property for providing credit to the buyer or for providing credit on certain terms. These charges are excluded from the finance charge even if they are passed on to the buyer, for example, in the form of a higher sales price. Seller’s points are frequently involved in real estate transactions guaranteed or insured by governmental agencies. A commitment fee paid by a noncreditor seller (such as a real estate developer) to the creditor should be treated as seller’s points. Buyer’s points (that is, points charged to the buyer by the creditor), however, are finance charges.

2. Other seller-paid amounts. Mortgage insurance premiums and other finance charges are sometimes paid at or before consummation or settlement on the borrower’s behalf by a noncreditor seller. The creditor should treat the payment made by the seller as seller’s points and exclude it from the finance charge if, based on the seller’s payment, the consumer is not legally bound to the creditor for the charge. A creditor who gives disclosures before the payment has been made should base them on the best information reasonably available.

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