So if the seller is paying for "Everything"....you issue the LE with all the columns blank?
And then show all the costs on the CD as paid by seller?

No, you still have to disclose all fees that can be imposed upon the borrower, regardless of who pays them. You should have a place in your software that allows you to specify that the fee will be seller paid. They'll see the fees as closing costs on the estimate side and then it will be listed on the CD in the "paid by others" column at closing.

If you have a copy of the signed purchase agreement for the property and the seller has agreed in that document to pay certain costs, those costs should not appear on the Loan Estimate. If the Agreement indicates that the seller will pay all closing costs or has committed to paying a stated amount toward closing costs, you can include those costs on the Loan Estimate, but include a Seller Credit amount in the Calculating Cash to Close section.

The LE is supposed to be a tool for comparison shopping.

My Purchase Agreement just said the Seller will pay all of buyers closing costs....no specific amounts. I ended up disclosing the usual costs estimate and showing a seller credit to offset them on the Loan Estimate. This seemed the most logical solution. Thanks!!!

Sorry to be jumping on an old thread but Im frustrated by all the different answers Im getting from banks around town. Several years ago our compliance team told us that we had to start itemizing any agreed amount of general seller paid closing costs listed on a contract. For instance if seller is paying $4500 in closing costs (not specific costs) we are to go down the list of fees and move APR fees first over to the seller paid column on the LE until they equal up to $4500. So that's what we have done for years now.

Today I get an email from an investor that we send our FHA files to for underwriting that we have under disclosed by .320. Of course I freak out bc of all the loans we send to them with seller paids they are set up exactly as mentioned above and we have never once gotten an email about under disclosing. I told them that the sellers were paying $4500 and they said that we shouldn't have that on the LE only on the CD. (We literally closed one last week with the same company that had $4000 in seller paids set up the exact same way as above and never heard a word about it)

So I call 3 friends in 3 different bank and broker shops around town. All 3 are nationwide large companies. 1 does it like us and the other 2 don't put seller paids on the LE at all.

So which way is compliant? We were told that we had to itemize them bc it effects the APR. PLEASE HELP...

Well, you have to first determine what the seller is providing - specific or general.

If the seller is providing a general seller credit, $4,500 in your example and you know about it at the time of issuing the LE, you must reflect it under seller credits in the cash to close table. (37(h)(vi)) A general seller credit will appear on the CD in Section L, Line 5. You cannot use a general seller credit to offset specific charges.

If you know about specific seller credits, on the LE you can disclose the full amount of the charge to borrower and offset that charge by a seller credit in the cash to close table. Or reduce or eliminate the borrower charge on the LE all together, based on the amount of the estimates charge and the amount of the specific lender credit.

And, as Randy has reminded us before, the Finance Charge and APR must reflect the obligation of the borrower to the lender. So you can't move a cost from the borrower to the seller if it's an FC unless the borrower is not contractually obligated to pay it. So be very careful to understand how your LOS calculates FCs.

John you said: "If you have a copy of the signed purchase agreement for the property and the seller has agreed in that document to pay certain costs, those costs should not appear on the Loan Estimate". (Emphasis added).

Can you tell me why? I am not seeing a reg or law or anything that clearly states that the LE does not include buyer costs paid by the seller. Is this just the norm in the industry?

Not John, but if you'll look at 1026.37, everything that talks about a fee being listed on the LE begins with "that the consumer will pay".

The purpose of the loan estimate is to provide -- you guessed it! -- an ESTIMATE of what the transaction will cost the APPLICANT. The stated purpose of the closing disclosure is to inform the borrower of ALL COSTS paid by the parties to the transaction.