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#2019421 - 06/10/15 02:17 AM Application deposit-Where to show on the CD?
Puzzled Offline
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We collect an application deposit on all loans that is credited toward the customer's costs if the loan closes. If we have ordered the appraisal, title etc... and the customer cancels or withdraws the loan, he/she would get back any amount after we pay 3rd party costs. My question is how to show the deposit on the closing disclosure? Would it be credited toward a specific cost and shown as paid by the customer before closing?

From what I can see the deposit would not be shown under "deposit." It appears that this is area is only for deposits held in contract on purchases.

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#2019422 - 06/10/15 02:57 AM Re: Application deposit-Where to show on the CD? Puzzled
Truffle Royale Offline

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You're not collecting the $ till after the LE is delivered and the borrower gives intent to proceed, right? So the question becomes, how are you showing it on the LE? On the CloD, page 2, put the cost in the Borrower Paid - Before Closing column, individually if you broke it out on the LE or in a lump if you showed it as an application fee. This image shows the credit report paid before closing but it could be the application fee further up the page too.

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#2019426 - 06/10/15 05:21 AM Re: Application deposit-Where to show on the CD? Truffle Royale
Puzzled Offline
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My thought is that the application deposit would not be shown on the Loan Estimate. The deposit is not shown currently on the GFE. There isn't any reason the deposit couldn't be allocated between more than one cost (appraisal/flood) on the Closing Disclosure.

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#2019431 - 06/10/15 12:22 PM Re: Application deposit-Where to show on the CD? Puzzled
RR Joker Offline
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on the CloD, it would appear logically that it should go in L, Other credits.
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#2019437 - 06/10/15 12:49 PM Re: Application deposit-Where to show on the CD? Puzzled
RVFlyboy Offline
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Originally Posted By Puzzled
My thought is that the application deposit would not be shown on the Loan Estimate. The deposit is not shown currently on the GFE. There isn't any reason the deposit couldn't be allocated between more than one cost (appraisal/flood) on the Closing Disclosure.

Puzzled, the application deposit would not be shown on the Loan Estimate because you are prohibited from collecting any fees from the borrower (other than a bona fide credit report fee) before providing the LE and getting "Intent to Proceed". You cannot charge an "application deposit" on a TRID-covered loan. See 1026.19(e)(2).
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#2019519 - 06/10/15 03:30 PM Re: Application deposit-Where to show on the CD? Puzzled
bwj8 Offline
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We do something similar, but call it an "Appraisal Deposit." It won't appear on the LE for reasons stated previously. Once we receive the Intent to Proceed, we will collect it along with the other documentation we require. On the CloD, it will appear in the Borrower-Paid before Closing column. If the actual appraisal ends up being more, we will have the difference in the Borrower-Paid at Closing column.

The issue we had was if the appraisal ends up being less, how do we refund the money? In line with RR Joker, we had someone say that it would go in L, Other Credits. The problem we run into there is that when using the alternate CloD for transactions w/o a seller we won't have the Summaries of Transactions table. So, we are planning on showing the difference in the Calculating Cash to Close table as a charge out of tolerance and refunding the money via a Lender Credit so that we can be consistent in all transactions.

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#2019536 - 06/10/15 04:04 PM Re: Application deposit-Where to show on the CD? Puzzled
Truffle Royale Offline

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But that's going to make you look like you consistently are causing a tolerance violation, isn't it?

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#2019541 - 06/10/15 04:10 PM Re: Application deposit-Where to show on the CD? Puzzled
bwj8 Offline
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In the cases where the appraisal deposit was too much, it is not the ideal thing to put on the disclosure that we exceeded legal limits, but it is also pretty uncommon. We kicked around the idea of applying the excess to another fee the customer has to pay, but achieving our goal of consistency could be tough to attain if that's the route we took.

In a refinance, when we use the alternate CloD, do you have a suggestion for where the excess could be disclosed?

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#2019543 - 06/10/15 04:18 PM Re: Application deposit-Where to show on the CD? RVFlyboy
Puzzled Offline
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We don't collect the application deposit until after we have issued the GFE & get the intent to proceed currently. The only change is that now we are required to document the intent to proceed (we do this currently). Why is this a violation? Most lenders collect an application deposit to cover their costs if the customer cancels. Are we expected to "eat" all of the costs if the customer walks away from the deal?

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#2019558 - 06/10/15 04:45 PM Re: Application deposit-Where to show on the CD? Puzzled
bwj8 Offline
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IMO, collecting an "Application Deposit" gives you greater flexibility in how you apply the amount to the fees on the CloD. Since we collect an "Appraisal Deposit" we are hesitant to start applying excess amounts from the deposit to other fees, in the spirit of being clear to the customer. Changing the name of our deposit is something being considered but, as with everything, the process is not as clean as one would assume.

To answer your question, I don't think you would necessarily have to have any tolerance violations, unless the application fee somehow was more than all of the fees the customer ends up having to pay. I just think there could be times where how you apply the funds from the application deposit might not be consistent.

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#2019563 - 06/10/15 05:07 PM Re: Application deposit-Where to show on the CD? Puzzled
Truffle Royale Offline

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Puzzled, it would only be a violation if you collected the deposit PRIOR to giving the LE and getting the Intent to Proceed. As for 'eating' all the costs if a customer cancels, how many times does this really happen? If you feel you want to collect for the appraisal after Intent is received, then do it. I just wouldn't collect so much that you're left trying to figure out where to put things on the CloD. jmho

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#2019850 - 06/11/15 03:57 PM Re: Application deposit-Where to show on the CD? bwj8
Puzzled Offline
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Our deposit is typically around $500-600 so should next exceed all of the loan costs.

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#2040620 - 09/25/15 04:50 PM Re: Application deposit-Where to show on the CD? Puzzled
river girl Offline
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In the test case I am reviewing now, we collected the $500 application deposit and it is being reflect on page 3 of the CD under L. other credits (this is a purchase loan).

Our intent is to apply it to the administration fee of $500. The LE shows this fee but it isn't carrying over to the CD.

My thought is it should be on page 2 of the CD with the $500 showing in the column borrower paid before closing. If it goes there, then it would flow over to the Calculating cash to close table as a negative in line Closing costs paid before closing.

If my thought on those two items is correct, then we would NOT place the $500 under L. other credits on page 3 (like it is currently showing).

??

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#2040637 - 09/25/15 05:26 PM Re: Application deposit-Where to show on the CD? Puzzled
jlroberts Offline
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We collect an application deposit after we receive the intent to proceed. We don't eat anything if they walk away (except the credit report) because we don't order the appraisal until we receive the deposit. I agree it would be a violation to put it on the LE since you cannot collect it until after they receive the LE and collecting it is not a valid CC.
The way it looks like ours is working on our test loans is that if we include it in Section VII it's flowing to the CD as a Credit (we don't apply it to anything specific). The way river girl is applying hers would work also showing that it went towards a specific fee.

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#2040647 - 09/25/15 05:42 PM Re: Application deposit-Where to show on the CD? river girl
John Burnett Offline
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Originally Posted By river girl
In the test case I am reviewing now, we collected the $500 application deposit and it is being reflect on page 3 of the CD under L. other credits (this is a purchase loan).

Our intent is to apply it to the administration fee of $500. The LE shows this fee but it isn't carrying over to the CD.

My thought is it should be on page 2 of the CD with the $500 showing in the column borrower paid before closing. If it goes there, then it would flow over to the Calculating cash to close table as a negative in line Closing costs paid before closing.

If my thought on those two items is correct, then we would NOT place the $500 under L. other credits on page 3 (like it is currently showing).

??
That appears to work. If you have anything from the deposit left after applying it in that manner, your next step would be to credit the balance toward another of the fees in section A.using a similar strategy.
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#2046934 - 10/29/15 03:18 PM Re: Application deposit-Where to show on the CD? Puzzled
Cheli Offline
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How are you applying this fee for a REFI transaction on the CloD?

We do not (or at least have not) put the $400 on the LE as it is not a legal obligation...On a purchase, we add it to Other Credits...Kind of stumped for Refis...other than adding it to fees as "Paid Before Closing..." on the CloD...

Thoughts?

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#2046963 - 10/29/15 04:09 PM Re: Application deposit-Where to show on the CD? Puzzled
Cheli Offline
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nvm - I went back and re-read this post...I think we will consistently apply it toward the appraisal fee, as intended, and show Paid Before Closing, and the difference paid at close.

Thanks - sorry.

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#2048056 - 11/04/15 06:55 PM Re: Application deposit-Where to show on the CD? Puzzled
Cliff Johnson Offline
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I agree with showing it as Paid Before Closing but is anyone else having issues with showing it POC when a seller credit will cover the cost, let's say for example the appraisal. If we have a $400 appraisal, collect that fee as a deposit from the borrower, mark it POC but now receive the contract stating seller will pay for the appraisal we are having issues with our system showing it both as a borrower POC and a seller-paid CC. In this case, it would make the fee appear to have costed a total $800. I'm not so sure that this is even a system specific issue though, in this case I don't think there is a way to accurately reflect on the CD that it only costs $400 if you are trying to accurately reflect that the $400 was collected from the borrower to pay for said appraisal that the seller has now contracted to pay. Is anyone else struggling with that concept or am I just thinking wrong?

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#2048073 - 11/04/15 07:39 PM Re: Application deposit-Where to show on the CD? Puzzled
Truffle Royale Offline

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Can you just put the seller's $400 in seller credits rather than assign it to the appraisal?

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#2048089 - 11/04/15 08:12 PM Re: Application deposit-Where to show on the CD? Puzzled
Cliff Johnson Offline
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38(j)(2)(iv) led me to believe that seller credits work the same way as lender credits where you would only disclose here if it was a lump-sum seller credit. In this example, the contract is stating that the seller will pay for the appraisal and not specifying just a general seller credit.

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#2048294 - 11/05/15 06:46 PM Re: Application deposit-Where to show on the CD? Puzzled
Moving Forward Offline
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We collect a $350 "Processing Deposit" to cover third party fees associated with an application. This is collected after receiving the intent to proceed and on the Closing Disclosure we show it as paid before closing by the borrower applying it to fees until the money runs out.

What we are struggling with is that when the final LE locking the rate is issued, we know that we have the $350 that will be applied towards the fees. As such, we have been showing the $350 on the final LE under "Adjustment & Other Credits". When the CloD is issued, it shows that the "Adjustments & Other Credits" have changed from $350 to $0.

Is it allowed to leave it completely off the final LE when we have it?

Should we disclose it differently.

Do I need to be concerned that the adjustments and credits are different?

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#2048778 - 11/09/15 06:12 PM Re: Application deposit-Where to show on the CD? Moving Forward
Cliff Johnson Offline
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I was under the impression from 37(h)(1)(vii) that you would not be able to show a borrower's deposit under Adjustments and Other Credits on the LE. Its more geared towards gift funds, builder credits, subordinate financing, grants, and other closing costs paid by "persons other than the loan originator, creditor, consumer, or seller". That excepting that amounts paid by the consumer at closing per the sales contract for items such as personal property negotiated in the sale also be disclosed within this section (see Comment 37(h)(1)(vii)-6). Comment 4 of that same section also talks about it's applicability to the good faith requirements of 19(e)(1)(i) so you may want to evaluate how that affects things on the loans where you have disclosed the $350 in the Adjustment & Other Credits on the LE but are showing $0 on the CD, i.e. I believe you would be looking at a $350 cure unless you can substantiate the credit remaining in the Adjustments & Other Credit section on page 3 of the CD by placing the deposit in either section K or L in the Summaries of Transaction table on the CD instead of itemizing against a direct closing cost since K and L roll up in to the Calculating Cash to Close table for Adjustments and Other Credits.

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