I know that I have to keep RESPA & TIL separate, but I'm struggling.

We provided a $3,000 lender credit in GFE box 2. The $3,000 credit can be used to offset fees, some of which are finance charges & some that are not finance charges. (I didn't realize we were providing lump sum credits.)

When the lender goes to calculate the APR, how should he determine which fees (finance charges or not finance charges) to which he should apply the $3,000 credit?

Thanks.

Anyone?

IMO, unless you apply the credit specifically to the affected charge then the credit is a general lender's credit toward total closing costs and it would not affect the APR charges.

Dan - Are you indicating that we should allocate the $3,000 to non-finance charges first and then any remaining to finance charges?

I think that we have to designate in our system how we're applying the $3,000 credit. For example, $300 to origination fee, $16 to flood determination, etc. until all the money is allocated.

Thanks.

If you do that, it becomes specific, I would think.

I'm struggling with how you would apply a general lender's credit. What does that mean?

Thanks.

The same way you apply a seller's credit on p 1 of the HUD.

General:
Closing costs $3500.
Lender's Credit $3000,
Net Closing costs $500.

The lender's credit is being applied toward the total closing costs and not each line item.

Right, the lump credit would simply go in the 200's of the HUD.

I'm now clear on disclosing the lender's credit on the HUD.

I want to ensure that I understand the APR impact. By doing a credit towards the total closing costs & not the individual line items, the lender's credit has no impact on the APR. For example, 5.00% APR if no lender credit & 5.00% APR if there's a lender's credit.

Is this correct?

Are you selling the loans to investors? Just wanted to give you heads up that some want a specific break out of the lender credit and telling them it is a "general" credit is a no-go. We have some investors that will not purchase a loan if we don't give them a specific break out - even of lender credits on page 1 of the HUD.

donna, just generically, and not considering investor requirements, I would say yes to your example.

MN Banker - We do sell to investors & I hadn't thought of the investor requirements that you mentioned. Thanks for the advice. I'll check with them.

If we disclosed the initial $3,000 credit in GFE box 2, doesn't the credit have to go on line 802 & not on page 1 of the HUD?

I was thinking that the only time the credit could go on page 1 of the HUD was if we decided to provide the credit after we had already provided the GFE.

Thanks.

In a normal world, that would be correct, donna...and if you know it will be $3000 no matter what...you should be okay...but if you're actual costs end up only $2500.00, you are going to be giving that borrower $500.00.

For this reason, some of us have decided that if we intend to pay some costs, we will just wait and show it in the 200's...thereby not giving money away.

Have a HUD statement with a seller credit on line 209, all closing costs are listed in borrower column on page 2. When verifying prepaid finance charges for the APR, found that fees totaling the seller credit were designated in the system as being paid by the seller and therefore not reflected in the APR. This is a secondary market loan so the closer may have been relying on the investor guidance. Is this an acceptable way to disclose?

I would think if a general credit was showing on page 1, these specific items should be included in the prepaid finance charges.

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.

Even if the HUD shows all settlement charges as being paid by the borrower? There is nothing in the actual file to show which items were allocated to seller. That information is only in the loan orgination system.