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#2130972 - 05/18/17 02:19 PM Attorney Fee - Paid outside Closing?
Justin C. Offline
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Registered: 10/22/15
Posts: 318
I know that TRID has some disclosure guidance related to costs that are Paid outside Closing. Are there restrictions on what types of fees can be labeled as such. We have a situation where an LO and Attorney want to set up the Attorney closing costs as being Paid outside Closing in order not to impact the Cash to Close section of the CD. They want the borrower to bring two separate checks at closing. One directly for the attorney and the other as the Funds due from Borrower at Closing. This may be due to the lender missing the fee while verifying sufficiency of borrower funds and the problems/delay that would arise to again verify bank statements, etc.

I feel like there is something wrong with this setup, but can't think of any for sure violations off the top of my head. To totally leave it off the CD would violate accurately disclosing the costs of the transaction, but if it was disclosed as POC, is that sufficient? Looking at some examples of what type of POC costs and where on the CD they are found, makes it seem like a settlement service provider cost would not go there. What if the borrower paid the attorney paid the cost directly to the attorney before closing? Could that be a solution? Or, is there an inherent problem with trying to get around the fact that we likely missed an expense when doing the calculation to verify funds? Thank you for your time and assistance.

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TRID - TILA/RESPA Integrated Disclosures Rule
#2130979 - 05/18/17 02:28 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
rlcarey Offline
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1st rule - play hockey and caught cheating and you end up in the penalty box. Hoping the referee is looking in the other direction when you do it is no way to live.
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#2130981 - 05/18/17 02:32 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
Dan Persfull Offline
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Have the attorney and loan officer explain how the borrower is paying a fee before closing if they are bringing money to the table?

his may be due to the lender missing the fee while verifying sufficiency of borrower funds

As you said the loan officer messed up and he's trying to cover his tracks by falsification. Also if he failed to disclose the attorney fee you most likely will have tolerance cure to also worry about.
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#2130983 - 05/18/17 02:34 PM Re: Attorney Fee - Paid outside Closing? [Re: Dan Persfull]
Justin C. Offline
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Registered: 10/22/15
Posts: 318
That's the way they wanted to do it. I was thinking about having the borrower pay directly today, rather than bringing the separate check at closing. Thank you both for your feedback! Greatly appreciated.

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#2131002 - 05/18/17 03:36 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
John Burnett Offline

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For your information, the abbreviation "P.O.C." is found three times in the entire regulation.

Specifically, if there items that should be disclosed under paragraph 1026.38(j) or (k), but are not paid from "closing funds" (defined as "funds collected and disbursed at real estate closing"), they are marked "Paid Outside of Closing" or "P.O.C." and the party making the payment is identified. The dollar amount is disclosed, but not in the cost columns. References 1026.38(j)(4)(i) and 1026.38(k)(4)(i).

The abbreviation is also referred to in Comments 38(j)4)(i)-1 and -2.

As noted below (I am editing this post to avoid misleading anyone), those "permissions" to use P.O.C. only address the Summaries of the Borrower's and Seller's transaction sections (K - N) on page 3 of the closing disclosure. Closing costs don't appear there. They go on page 2. What this loan officer suggests isn't permitted.


Edited by John Burnett (05/19/17 02:13 PM)
Edit Reason: clarity
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#2131017 - 05/18/17 04:11 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
Justin C. Offline
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Registered: 10/22/15
Posts: 318
Yes, that is the section I was referring to. It would seem that closing costs wouldn't be able to go there?

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#2131021 - 05/18/17 04:22 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
John Burnett Offline

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Actually, that's correct, Justin. 38(j) and (k) address the summary of the borrower's and seller's transactions, respectively, in sections K to N on page 3 of the closing disclosure. Only entries appropriate for those sections can legitimately be handled "P.O.C."

Closing costs of the type being discussed in this thread would appear in section B or C (and sometimes H) on page 2, and the costs appear as either paid before closing or at closing by the buyer/borrower or seller, or paid by others. There is no provision for a page 2 entry appearing as "Paid Outside of Closing."

Thanks for pointing that out. Saves us a lot of time gnashing teeth over motives.
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#2131035 - 05/18/17 04:51 PM Re: Attorney Fee - Paid outside Closing? [Re: Justin C.]
Justin C. Offline
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Registered: 10/22/15
Posts: 318
Sounds like they didn't find out about the fee until later. The borrower went with another service provider, so there wouldn't be any tolerance implications. It's just that a certain amount of Cash to Close has already been cleared and verified with Underwriting, so if the borrower has to bring in the higher amount, then some more documents may be required, which either the borrower doesn't want to provide or doesn't want to get the closing delayed.

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