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#2045884 - 10/23/15 04:09 PM Repairs and Seller Credits
ComplianceOK Offline
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Registered: 04/28/03
Posts: 13
Loc: Oklahoma
It is our general practice to attempt to obtain the purchase contract prior to issuing the LE. We receive contracts that have negotiated stipulations between the purchaser and seller that we are unsure as to whether to disclose. For example, the contract may state that the seller will pay for repairs up to $1500. Would the bank reflect customer costs and seller credits of the $1500 as a ‘best faith’ estimate given the verbiage of ‘up to’? If so, would the cost be disclosed under H . Other? Would the cost be labeled as 'Optional'? Or should the bank even disclose this cost and ‘credit’?

Thanks in advance for anyone willing to provide an opinion!

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TRID - TILA/RESPA Integrated Disclosures Rule
#2045906 - 10/23/15 06:00 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Truffle Royale Offline


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If there's a repair that's likely to need to be completed as a condition of granting the loan, then yes, you should include it because it's a cost of getting the loan.
Ex: Roof leaks so it will need to be repaired. OTP says seller will pay up to 1500 for that repair. UW will call for it to be done prior to closing. So it will go on the LE with the offsetting seller credit. It's going to go in H. Other and be unlimited so if the repair comes in higher, the buyer will pay the difference.

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#2045973 - 10/23/15 09:00 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
John Burnett Offline

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You have to have reason to believe that the repair will be needed and the seller will therefore provide the credit. Without knowing more about the statement that the seller will provide a credit of up to $1500 for repairs, you don't know whether there are any repairs (there probably are, or why is the statement in the Purchase Agreement) or how much they are. You need to do some due diligence to find out. Then decide what goes on the LE.
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#2047825 - 11/03/15 07:56 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
dwedding Offline
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Registered: 04/15/03
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Example: The appraisal has come in on a refinance application and a repair (new roof) called out on the appraisal, which will also require a final inspection by the appraiser. We re-disclose the LE to update the appraisal fee to include the final inspection cost, but are we required to disclose the repair and shoppable provider within Section C? This is a refinance application, so borrower expense.

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#2047885 - 11/03/15 11:24 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Truffle Royale Offline


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Fixing the roof is now a condition of getting the loan so yes, you have to put it on the LE.

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#2047986 - 11/04/15 05:06 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
dwedding Offline
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The repair expense is then allowed to be disclosed in Section H. The contractor employed to complete the repair is engaged by the consumer and never the lender. The lender would never want to provide an implied warranty by referring a contractor, so it would be impractical to have to list this service in Section C or have the lender provide a shoppable provider for the repair.

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#2066094 - 02/25/16 06:57 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Darth HMDA, CRCM Offline
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Registered: 12/13/13
Posts: 1355
Loc: CA
I'm bringing this thread back to life.

I can't find anything in the reg regarding the disclosure of repairs on the Loan Estimate. Can anyone point me to guidance about the disclosure of repair?

We have an application for a refinance. The appraisal came back and in order to make the loan the borrower would need to complete a porch and flooring that is currently partially done.

Based on what I am reading in this thread, you have all stated that we must now re-disclose the Loan Estimate including costs for these repairs.

I understand disclosing the inspections but I don't think it is reasonable for us to disclose the actual cost of the repair. We have no idea what these projects will cost. The borrower could complete most or part of the projects on their own (which we have seen multiple times).

Short of waiting for an invoice from a contractor and requiring the applicant to forward us the invoice prior to re-disclosing the Loan Estimate I don't know how we would disclose this information.

This is very similar to the roof repair dwedding asked about.

Is this how others are treating repairs and the disclosure of said repairs?

Can someone point to guidance? Thank you everyone.
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#2066107 - 02/25/16 07:19 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Darth HMDA, CRCM Offline
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There is this guidance from the CFPB LE/CD guide regarding funds by the settlement agent for repairs - but this does not apply to the lender required repairs:

Disclose the Payoff of the First Mortgage Loan, if any, (§ 1026.38(k)(2)(v)) and then the Payoff of the Second Mortgage Loan, if any. (§ 1026.38(k)(2)(vi)) Disclose the payoff or satisfaction amounts for any additional seller obligations as separately itemized amounts. (§ 1026.38(k)(2)(viii)) Examples of these seller obligations include, but are not limited to:

Funds to be held by the Settlement Agent for repairs or the payment of water, fuel, or other utility bills that cannot be prorated between the parties at closing because the amounts used by the seller prior to closing are not yet known at closing. Subsequent disclosure of a revised Closing Disclosure after the repairs are made or the utility bill is received is optional. (Comment 38(k)(2)(viii)-3)
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#2066168 - 02/25/16 10:14 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Loc: Galveston, TX
Deny the loan for collateral and have them come back when they are done.
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#2066181 - 02/25/16 11:23 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Darth HMDA, CRCM Offline
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Loc: CA
That would certainly make it easier smile

I'm not sure the department (or customer) would like that answer though.

Might wind up happening anyway (happens more often than not when a major repair is needed).
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#2090035 - 07/26/16 08:08 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Darth HMDA, CRCM Offline
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Registered: 12/13/13
Posts: 1355
Loc: CA
So, I'm resurrecting this thread. According to Truffle, repairs required to be completed as a condition of the loan must be disclosed.

Can anyone point me to guidance on repairs in the reg, guides, or Outlook live events? Thank you!
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The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.

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#2090060 - 07/26/16 09:54 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Who's paying for them and when?

If there is a holdback involved, see this thread:

https://www.bankersonline.com/forum/ubbt...its#Post2089790
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#2090122 - 07/27/16 03:17 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Darth HMDA, CRCM Offline
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Registered: 12/13/13
Posts: 1355
Loc: CA
For instance, in a refi - roof repair is required - does is need to be disclosed, and if so, does it go in section H, or does a list of providers need to be sent and repair disclosed in section B or C, respectively?

Thank you Randy!
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#2090126 - 07/27/16 03:23 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Registered: 07/16/01
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Loc: Galveston, TX
Are the repairs a requirement of getting the loan and they have to be completed before the loan is made? If they are, then it would be in Section B or C, as applicable. If you are doing a hold-back for the repairs, refer to the CFPB Construction Loan webinar.
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#2131647 - 05/24/17 02:10 PM Re: Repairs and Seller Credits [Re: rlcarey]
Compliance NABW Offline
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Resurrecting again because there is some conflicting information on where to put repairs that become a condition of getting the loan. One poster indicated you would not want to refer a contractor because of the risk that you are verifying their ability to do a good job. The last post indicated you would put a repair contractor as a shoppable service (Section C), or the lender would even employ one themselves (Section B).

What if the repair is not a condition of getting the loan but we are aware of the cost and who is doing the work? Is this a Section H fee, or is it just something to be left off the TRID disclosures? Borrower is getting a barn painted and paying for it prior to closing. Reinspection is being done prior to closing by an appraiser to verify barn was painted.

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#2131649 - 05/24/17 02:20 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Reinspection is being done prior to closing by an appraiser to verify barn was painted.

Then how is this not a condition of the loan if you are getting your appraiser back involved? Why does the bank care?
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#2131650 - 05/24/17 02:22 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
John Burnett Offline

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If the borrower is paying for the barn painting and there will be a reinspection done by the appraiser before closing, it sure sounds like a condition of the loan to me.
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#2131655 - 05/24/17 02:27 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Compliance NABW Offline
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Registered: 10/22/15
Posts: 1193
Yes, it is in fact a condition. So, where does it go on the disclosures? For information sake, where would it go if not a condition?

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#2131668 - 05/24/17 02:50 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Truffle Royale Offline


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If the item is a condition of getting the loan, then you have to show the cost in B or C.
Not sure I understand how repairs (or painting) wouldn't be a condition if the property involved is your collateral.

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#2131670 - 05/24/17 02:58 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
RR Joker Offline
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Borrower is 'getting' the barn painted...why? Because you say so? Apparently, if you are requiring an inspection of it! How bizarre! I sure wouldn't want to touch a 'shopping' list for something of that nature for the reasons you state above! shocked!
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#2131704 - 05/24/17 04:34 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
Compliance NABW Offline
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Registered: 10/22/15
Posts: 1193
So, if it becomes a closing cost in connection with the loan and we need to show in Section C, then we would need to provide an updated WPL/SSPL giving the borrower an example of who would perform the service. What if the borrower already "shopped" and selected the provider. Do you still need to give a list of available service providers? At the point we became aware of the fee, the borrower had already contracted with the painter to do the job (Supposedly).


Edited by Justin C. (05/24/17 04:38 PM)

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#2131706 - 05/24/17 04:47 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Registered: 07/16/01
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Loc: Galveston, TX
At the point we became aware of the fee, the borrower had already contracted with the painter to do the job (Supposedly).

A little far fetched I think. Someone from the bank had to tell them this needed to happen to get the loan. Who ever told them thought it was not going to cost anything?

I guess I am a little confused as to what a coat of paint on a barn really has to do with valuing the property?? There is something not quite right with this situation.
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#2131709 - 05/24/17 04:50 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
RR Joker Offline
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If you don't give a list, all that happens is that it becomes zero tolerance. I'm wondering though, that if it was a condition for the loan...and he has had time to shop on his own...I would think you would have missed your 3-day window...I'd be more worried about having to cure then entire fee at this point. crazy
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#2131766 - 05/24/17 06:48 PM Re: Repairs and Seller Credits [Re: RR Joker]
Compliance NABW Offline
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Registered: 10/22/15
Posts: 1193
RL - Yeah, I don't know. They don't come to me before they do these things smile. They just come to me when they need help disclosing the fee.

RRJoker - Yeah, that's where I'm going with it as well. They should have known about it when they did the reinspection fee. It sounds like they knew about that a couple weeks ago, so they missed the three day window. I this is a Section C fee, then I believe we are in trouble from a tolerance standpoint.

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#2131779 - 05/24/17 07:20 PM Re: Repairs and Seller Credits [Re: ComplianceOK]
rlcarey Online
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Registered: 07/16/01
Posts: 69819
Loc: Galveston, TX
Sounds like you bought several gallons of barn paint smile
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