I wanted to get some clarification on how to show an appraisal fee on the CD. The borrower will pay for the appraisal prior to closing. The following is how our software is showing the appraisal fee.

Loan Estimate - Appraisal fee of $400 is shown is Section B and included in total closing costs and the Estimated Cash to Close totals.

Closing Disclosure - $400 appraisal fee is listed in Loan Costs section (Section B) in the Borrower-paid Before Closing column and no longer flows to the Cash to Close totals (like shown on the LE).

In the Calculating Cash to Close section: the Closing Costs Paid Before Closing line it shows $0 in the Loan Estimate column and $400 in the Final Column. The Did This Change column says "Yes - you paid these Closing Costs before Closing".

I am questioning the Calculating Cash to Close section as it shows the Loan Estimate of $0 when the appraisal fee was included in Section B of the Loan Estimate and also shows that the fee amount changed. Is this correct or how should the fee be shown on the closing disclosure. I was expecting $400 in both the Loan Estimate and Final Column and Did this Change to be No. However, if the $400 is listed in the Loan estimate column, then to foot down in would be included in the Cash to Close total. I am not sure what is correct at this point.

Appreciate any insight.

It's strange, but it's correct. The question about changing since the LE focuses on the prepaid closing costs, which, of course, aren't disclosed as prepaid on the LE. So the answer to this question, if an appraisal fee is collected before closing, will always be YES.

The comparison of the LE appraisal estimate with the actual appraisal cost is done, of course, off form. But the appraisal cost is part of the Total Closing Costs in the Final column in the Calculating Cash to Close table, and if you charged more than shown on the LE, you will have a cure statement on that line, all other things being equal.

If we collect a $400 fee (for appraisal and credit report) after receive the intent to proceed can we show this credit in Section L of the Closing Disclosure or must it show in the "before closing" column on page 2 of the CloD?

We are having a title company tell us they are having trouble balancing when we show it on page 2. Is either way acceptable?

You collect the $400 up front from the borrower for the appaisal and credit report fee. You will show the appraisal and credit report fee in the borrower's column as paid before closing.There is no lender's credit to be disclosed.

Got it! Thanks, Dan!

We collect $400 for the appraisal before closing. If the appraisal comes in at $350, can we apply the $50 to any other cost on the Disclosure?

No. They get their overpaid $50 back.

But, isn't applying the $50 to another cost the same as giving them $50 back?

How is that reflected on the Closing Disclosure?

If you collected $400 up front and the appraisal came in at $350 then I would show in Section B, Line 1 Borrower-Paid at Closing $350 and $400 in Borrower Paid Before Closing. This will net out in Section J giving the borrower his $50 toward the closing costs.

I don't think showing $400 up front and $350 at closing would produce the desired net effect you think it would. Those are both positive amounts and wouldn't be netted against one another, they would just both add to the bottom line in J for a total of $750. I just found out how our LOS works with these today and in this case it would leave the $400 in the column for Before Closing and put a -$50 in the column for At Closing so when you get to J, the total of closing costs are reduced by that $50. While accurate, it's not something the rule specifically addresses but I can at least understand the logic of it and feel comfortable in that.

The closing costs on the CloD can't exceed actual costs of services paid. 1026.38(f)(3)(i). How about including $350 in the Borrower Paid before closing column and $50 in Lender Credits to give the borrower credit for the overpayment?

In a transaction with a seller, you can do it that way, or you can show the $50 as "Overpayment of Appraisal Fee" in Section L, under Other Credits.

I don't think showing $400 up front and $350 at closing would produce the desired net effect you think it would.

You are correct. I was looking at the Borrower Paid Closing Costs Subtotals instead of the total on Line J.