We participate in a CRA Wish program that provides down payment funds, as well as additional funds to help cover the closing costs of the loan.

We have been subtracting the amount of the grant provided for closing costs from all closing costs (starting at line item #801 on the HUD1 and working down) until the funds are exhausted. The prepaid finance charge is then computed based on the amount of prepaid charges remaining in excess of the grant funds.

I'm not comfortable excluding any of the prepaid finance charges from the calculation, simply because they are paid for by grant funds, as they are paid for on behalf of the borrower by a program that the borrower is participating in.


Any thoughts?

I think you have a problem on 2 levels by my reading of the regs.

1) RESPA requires that the amounts be entered in lines 801 etc. then a credit given to the borrower in the 200 section.

2) TIL does not allow negative FC items. All the FC items should be included in the calculation. Credits not reducing the FC.

That’s the way I read it, but I would love input from someone else.

Still struggling with this question too: Seller agrees to pay $3,000 in closing fees. Are these included in the APR calculation?

Lender agrees to pay $2,000 towards closing fees. Are these in the APR?


What is confusing the issue is the RESPA Q&A indicates these are listed under buyers closing costs regardless. The reason given is when you do the comparison of GFE and HUD1 on page 3 you show everything paid by the buyer. Otherwise the comparison will not work. Please--need help on this.

The grant, I assume is awarded to the borrower and the borrower under the terms of the grant applies the money toward the closing costs or allows the grant to be paid directly to the bank. If that scenario is correct then the borrower is paying the closing costs with the assistance of the grant therefore you would not discount any of the PPFCs.


Unless the seller is legally obligated to the bank for the payment of the fees you cannot discount the PPFCs. In most cases (terms of the purchase agreement) the seller is obligated by contract to pay the buyer moneys toward the closing costs. They are not obligated to pay the bank.

If the bank applies a lender credit in the 200 series then the PPFCs are not affected. If they pay each line item then the particular item would not be a PPFC if it fell in that category.


The question is. Are you paying closing costs, or are you giving a credit toward closing costs?

If you are paying closing costs then you will pay each line item regardless of costs. If you are giving a fixed amount toward costs then you are giving a credit which must show in the 200 series. IMHO that credit does not affect the PPFCs.