Some of our lending staff are expressing heartburn that revised LEs are going out that do not show that, for instance, a $1,500 appraisal fee has already been paid for by our applicant, or the credit bureau fee still shows as a cost at closing rather than already paid.

To address this issue, some have occasionally added a line item in section H described as "prepaid items" and throw a negative value into the costs line so that it nets out on the cash to close calculation reflecting the items the applicant has paid for in advance.

I am not particularly comfortable with this as 1026.37(g)(4) says "... an itemization of any other amounts in connection with the transaction that the consumer is likely to pay..." which to me means no negatives; they aren't getting money from some service provider. In fact, I would say that with the exception of the aggregate adjustment for escrow, or per-diem interest, none of the sections should reflect negative values.

I am looking for an airtight reason to say "this is not allowed" which is my interpretation. The current philosophy for this decision is that "we can't find a 'thou shalt not' in the regs!" which seems spurious at best, and intentionally non-compliant at worst.

Does anyone else even bother to try to reflect things like appraisal deposits prior to the CD?

Thanks

Not that I am aware of. If section H of the LE was to show credits for items already paid the rule would specifically allow for that. As you noted, the rule says that section H is for items the consumer is likely to PAY. Also note that the aggregate adjustment for the escrow account is not permitted to appear on the LE in section G, or elsewhere. See the official interpretation of the rule at 37(g)(3)-2.

The regulation tells you what is allowed in Section H. The list of items not allowed would circle the earth. Ask them how it fits in the definition of the allowed fees?

I agree 100% with you Randy. I am having difficulty explaining, or they are having difficulty accepting, that the LE is an estimate of costs and is not intended to show credits for lender fees POC, that happens on the CD.

It's occasionally like beating my head against a wall.

Just tell them that the LE is designed to show the estimated cash to close that the customer has to put up for the transaction after all is said and done. The LE does not indicate to the borrower when those payment are going to occur during the course of the application process.

Thanks Randy, and I want to say I really appreciate how active you are on BoL. You're an incredible resource!

Also, the LE was designed so that customers could compare loan offers made by multiple institutions. By reducing that bottom line closing cost figure, you are misrepresenting your costs as compared to the bank across the street's.