A MLO disclosed a GFE with all fees being paid by the seller (per the purchase agreement). I have read all the posts about this and know that isn't what he was suppose to do but it is what it is. My question is: if we leave it this way, none of the fees will appear in the APR calculation, if we change it and put them where they should go and do a credit, than there is a huge tolerance cure! Any thoughts on the right thing to do.

Wow. Your system pointers do not appear to be set up correctly. Even though the disclosure is totally wrong and you know that...you should be able to direct your software to the fee being paid by the seller but recognized as an APR fee.

It's possible you have templates set up for processing purposes which limits that ability (I can customize this area in ours). YOu may need to look at this with an administrator if you are not one yourself and see if the ability exists.

And you ARE going to have a huge tolerance cure...in fact, you will likely be refunding everything to the borrower in the zero and '10%' sections as nothing was disclosed!

Let me break this down to what you are going to have to do. Your HUD will need to show the actual costs to the borrower. The contract means nothing for page 2 and page 3.

When you get to page 3, you will have zero's in all portions of the GFE side and the actual numbers on the HUD side.

The seller will give a credit for the the costs, per the contract and the bank will be paying the customer the total 'tolerance' fees due to it's error. You will basically have 100% tolerance cure as 10% of zero = zero.

Do you use a three-party agreement (buyer, seller, bank) to transfer the responsibility for payment of the fees, or simply let the buyer and seller handle it with a two-party agreement?

(I considered that possibility except for the fact that the OP specifically stated it was done by the purchase contract and nothing indicated there were additional agreements based on the OP's concern of the need to show the APR fees).

I've never seen one of those agreements in real life. They have always been a mystery to me.

Thanks to both of you!!!! I was pretty sure I knew that would be the answer but sometimes, when you are a compliance officer, its nice to find someone that tells you that you are right!!! I need just need one day when everyone does things the way they have been trained!

Can I clarify one thing? We redid the GFE, it shows a cure of $2,000, so the borrower will get the cure of $2,000 plus the credit from the seller for closing costs????

Why would a cure be on a GFE?

I don't see any way around it. The contract obligates the seller to pay the costs, so that's due (probably built in the price) and the bank goofed...so the borrower comes out winning big time!

ETA: I'm pretty sure she meant the HUD.

Thanks to both again. Yes I did mean HUD. Must of just been so overwhelmed this morning by the fact that the system defaults are set to borrower but MLO overrode and purposely but seller in there!!!! I guess its job security for me!

Also, I suggest you do some training to reinforce that the LO should NEVER look at the OTP PRIOR to preparing the GFE. That way they'll never be influenced by anything in it. The GFE is to show the costs of getting the loan, not any particular home.