I don't know why I am having so much trouble with these lender credits under TRID.

Couple types of lender credits are advertised. First, a general lender credit which is a percent of the loan amount and can be applied to whatever the customer wants in closing costs or rate buy downs. The second is a credit specifically for the appraisal. For both types of credits the lender credit line on the LE is always left blank.

On the CD, if the customer wants to do a rate buy down with the credit the "% of Loan Amount points" is left blank (the amount of lender credit covers the whole buy down) and no credit info is disclosed anywhere else. If the customer wants to use the credit for other closing costs the total amount is put as a lender credit at the bottom of page 2. The practice is the same for the appraisal credit with the lender credit at the bottom of page 2.

Question 1: Can lender credits be left off the LE when its known that they will eventually be provided?

Question 2: Would the CD be correct if the process described above for the rate buy down/credit was used? If this isn't correct would there be APR issues related to the buy downs being excluded?

I read through a few other posts related to TRID and lender credits which raise some suspicions that this isn't working as it should be but I am trying to confirm.

Thanks in advance.

Question 1: Can lender credits be left off the LE when its known that they will eventually be provided?

A general lender credit offered to the customer at the time of application cannot be left off of the LE, as that would violate the good faith provision.

If the lender is going to pay for the appraisal fee or any other specific fee (specific lender credit), the appraisal fee would be left off of the LE and the payment for the appraisal would be listed in the paid by others column on the CD with a (L) designation.


Question 2: Would the CD be correct if the process described above for the rate buy down/credit was used? If this isn't correct would there be APR issues related to the buy downs being excluded?

A general lender credit cannot be used to offset prepaid finance charges. Since they can designate your general lender credit in any manner the borrower chooses, you cannot use it to offset finance charges.

CFPB Webinar April 12 2016:

MS. SWITZER: Thanks, Alexa. To follow up on the discussion of the finance charge and APR,
we have a question on slide 9 about the effect of lender credits on the finance charge and APR.
Specifically, can premium rate credits or other types of lender credits be applied to reduce the
finance charge and APR?

MS. REIMELT: A creditor may apply premium rate credits or other types of lender credits to
reduce the finance charge and APR only in a manner consistent with the terms of the legal
obligation. As a reminder, it's important to note that the rule did not change the definition of
finance charge under Section 1026.4, nor did it change the method for calculating the APR under
Appendix J.

As we discussed in response to question 1, Section 1026.17(c)(1) requires that the disclosures
reflect the terms of the legal obligation between the creditor and the consumer. So if the creditor
provides a lender credit, the terms of the legal obligation determine whether the credit may be
applied to reduce the finance charge and the APR. For example, if a specific lender credit is
applied to a finance charge, such as an origination fee, under the terms of the legal obligation,
then the specific lender credit would reduce the finance charge and APR.

Comment 17(c)(1)-19 specifically addresses the disclosure of rebates and loan premiums and
explains that if a creditor offers a rebate or premium to the consumer, those rebates and
premiums must be reflected according to the terms of the legal obligation between the consumer
and the creditor. So if the creditor is legally obligated to provide the premium or rebate to the
consumer as part of the credit transaction, the disclosures must reflect the premium or rebate
value in the manner and at the time the creditor is obligated to provide it.

Thank you for your response. This is a bit perturbing to say the least.

One follow up question. In my example, a credit is advertised that the customer can apply as they would like. If the customer makes that determination prior to closing, as would be required if they want to buy down the rate, could this be a change of circumstance that could change the credit from being a "general credit" to being a specific credit and thus remain compliant with the restrictions on applying general credits towards prepaid finance charges?

In my example, a credit is advertised that the customer can apply as they would like.

Well, it is just MHO, but "apply as they would like" is still a general lender credit.