Compliance Updates

October: Weekly Compliance Updates

Managing Lender and Seller Credits on the LE/CD

October 30, 2015

After a long TRID implementation hiatus, IDS Compliance updates return on a weekly basis. Although everyone is tired of hearing about TRID, there appear to be a few popular issues worth clarifying. Here’s a review of two FAQ’s from the Resources website that have been popular issues:

Why are “lender-paid” specific fees included in Lender Credits on the Loan Estimate (LE), but not the Closing Disclosure (CD)? Managing Lender Credits on the LE/CD.

The TRID rule accounts for specific lender-paid fees on the Loan Estimate in a different way from the Closing Disclosure. The LE does not have a “Paid by Others” column next to each fee like the CD. To account for lender-paid fees, the LE includes the fee in the calculation for the fee section in which it appears, then adds that same amount into the “Lender Credits” calculation for J. TOTAL CLOSING COSTS to offset the amount included in the fees. The end result on the LE is that the lender-paid fees that appear in the fees are washed out in J. TOTAL CLOSING COSTS before the J. TOTAL CLOSING COSTS before that amount is added to the Cash to Close calculation. On the CD, specific lender-paid fees show the lender-paid amounts in a column that is separate from any borrower-paid amounts. The lender-paid amounts on the CD are not included in the fee section summations, nor in the Cash to Close table. This can cause confusion as the amounts that make up your fee totals will appear to be different between the LE and CD. Here’s how this may appear:

Loan Estimate (LE):

Closing Disclosure (CD):

NOTE: Seller-paid fees function in a similar way, see the FAQ for seller-paid fees.

NOTE: Lump-sum General Lender Credits may be applied to a loan and accounted for on the LE or CD. In either case, they are added in the idsDoc System on the Fees page, General Lender Credits panel.

Why do “seller-paid” specific fees show up on the Loan Estimate (LE) and affect Cash-to-Close, but not the Closing Disclosure (CD)? Managing Seller Credits on the LE/CD.

The TRID rule accounts for specific seller-paid fees on the Loan Estimate in a different way from the Closing Disclosure. The LE does not have a “Seller-Paid” column next to each fee like the CD. To account for seller-paid fees, the LE includes the fee in the calculation for the fee section in which it appears, then adds that same amount into the “Seller Credits” section of the Cash to Close table to offset the amount of the credit included in the fees. The end result on the LE is that the seller-paid fees that appear in the fees are washed out in the final “Estimated Cash to Close” calculation. On the CD, specific seller-paid fees show the “seller-paid” amounts in a column that is separate from any “borrower-paid” amounts. The seller-paid amounts on the CD are not included in the fee section summations, nor in the Cash to Close table. Just like the LE, the seller-paid specific fees are washed out of the amount of money the borrower will bring to closing on the CD, just in a way where they aren’t included in any of the fees calculation at all. This can cause confusion as the amounts that make up your fee totals will appear to be different between the LE and CD. Here’s how this may appear:

Loan Estimate (LE):

Closing Disclosure (CD):

NOTE: Lender-paid fees function in a similar way.

NOTE: Lump-sum Seller Credits may be applied to a loan and accounted for on the LE or CD. In either case, they are added in the idsDoc System on the Summaries of Transaction page, SELLER CREDITS fields located at L.05 and N.08.