[Angie Cowell]

If you are doing a second mortgage down payment assistance loan that is closing with the first, in the Calculating Cash to Close section of the LE page 2, should anything go in the deposit section? We have a $2,000 deposit for the property and it is reflected on the LE for the first mortgage. Should that same deposit be reflected on the second as well?

Topic

[rcooper]

From the information you’ve given you seem to have it correct with the deposit listed in on the LE for the purchase transaction. If I’ve misunderstood something let me know.

1026.37(H)(1)(iv):(iv) Deposit. (A) In a purchase transaction as defined in paragraph (a)(9)(i) of this section, the amount that is paid to the seller or held in trust or escrow by an attorney or other party under the terms of the agreement for the sale of the property, disclosed as a negative number, labeled “Deposit”;

(B) In all transactions other than purchase transactions as defined in paragraph (a)(9)(i) of this section, the amount of $0, labeled “Deposit”;

Commentary:
37(h)(1)(iv) Deposit.
1. Section 1026.37(h)(1)(iv)(A) requires disclosure of a deposit in a purchase transaction. The deposit to be disclosed under § 1026.37(h)(1)(iv)(A) is any amount that the consumer has agreed to pay to a party identified in the real estate purchase and sale agreement to be held until consummation of the transaction, which is often referred to as an earnest money deposit. In a purchase transaction in which no such deposit is paid in connection with the transaction, § 1026.37(h)(1)(iv)(A) requires the creditor to disclose $0. In any other type of transaction, § 1026.37(h)(1)(iv)(B) requires disclosure of the deposit amount as $0.

[Angie Cowell]

Both loans are considered a purchase transaction. So I am assuming I should list on both.

[rcooper]

Can you explain the transaction a little more? Is it one transaction or are these two separate loans? If separate, does the down payment assistance loan meet the definition of a purchase under 1026.37?

[Angie Cowell]

That’s where I am going wrong. No, it does not meet the definition when I go to the commentary, it is “Other”. Thank you.

[rcooper]

Angie Cowell,
Something I wanted to share that came to my attention and I thought might benefit you: if proceeds of the simultaneous loan will be going toward the purchase of the property securing the loan then it would be considered a purchase and you could use the alternate Cash to Close without the deposit line. This was discussed in an August 2014 Outlook Live webinar.

[Author]

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