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#2045884 - 10/23/15 04:09 PM
Repairs and Seller Credits
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New Poster
Joined: Apr 2003
Posts: 16
Oklahoma
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It is our general practice to attempt to obtain the purchase contract prior to issuing the LE. We receive contracts that have negotiated stipulations between the purchaser and seller that we are unsure as to whether to disclose. For example, the contract may state that the seller will pay for repairs up to $1500. Would the bank reflect customer costs and seller credits of the $1500 as a ‘best faith’ estimate given the verbiage of ‘up to’? If so, would the cost be disclosed under H . Other? Would the cost be labeled as 'Optional'? Or should the bank even disclose this cost and ‘credit’?
Thanks in advance for anyone willing to provide an opinion!
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#2045973 - 10/23/15 09:00 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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You have to have reason to believe that the repair will be needed and the seller will therefore provide the credit. Without knowing more about the statement that the seller will provide a credit of up to $1500 for repairs, you don't know whether there are any repairs (there probably are, or why is the statement in the Purchase Agreement) or how much they are. You need to do some due diligence to find out. Then decide what goes on the LE.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#2047825 - 11/03/15 07:56 PM
Re: Repairs and Seller Credits
ComplianceOK
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100 Club
Joined: Apr 2003
Posts: 122
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Example: The appraisal has come in on a refinance application and a repair (new roof) called out on the appraisal, which will also require a final inspection by the appraiser. We re-disclose the LE to update the appraisal fee to include the final inspection cost, but are we required to disclose the repair and shoppable provider within Section C? This is a refinance application, so borrower expense.
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#2047986 - 11/04/15 05:06 PM
Re: Repairs and Seller Credits
ComplianceOK
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100 Club
Joined: Apr 2003
Posts: 122
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The repair expense is then allowed to be disclosed in Section H. The contractor employed to complete the repair is engaged by the consumer and never the lender. The lender would never want to provide an implied warranty by referring a contractor, so it would be impractical to have to list this service in Section C or have the lender provide a shoppable provider for the repair.
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#2066094 - 02/25/16 06:57 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Dec 2013
Posts: 1,399
CA
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I'm bringing this thread back to life.
I can't find anything in the reg regarding the disclosure of repairs on the Loan Estimate. Can anyone point me to guidance about the disclosure of repair?
We have an application for a refinance. The appraisal came back and in order to make the loan the borrower would need to complete a porch and flooring that is currently partially done.
Based on what I am reading in this thread, you have all stated that we must now re-disclose the Loan Estimate including costs for these repairs.
I understand disclosing the inspections but I don't think it is reasonable for us to disclose the actual cost of the repair. We have no idea what these projects will cost. The borrower could complete most or part of the projects on their own (which we have seen multiple times).
Short of waiting for an invoice from a contractor and requiring the applicant to forward us the invoice prior to re-disclosing the Loan Estimate I don't know how we would disclose this information.
This is very similar to the roof repair dwedding asked about.
Is this how others are treating repairs and the disclosure of said repairs?
Can someone point to guidance? Thank you everyone.
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The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.
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#2066107 - 02/25/16 07:19 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Dec 2013
Posts: 1,399
CA
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There is this guidance from the CFPB LE/CD guide regarding funds by the settlement agent for repairs - but this does not apply to the lender required repairs:
Disclose the Payoff of the First Mortgage Loan, if any, (§ 1026.38(k)(2)(v)) and then the Payoff of the Second Mortgage Loan, if any. (§ 1026.38(k)(2)(vi)) Disclose the payoff or satisfaction amounts for any additional seller obligations as separately itemized amounts. (§ 1026.38(k)(2)(viii)) Examples of these seller obligations include, but are not limited to:
Funds to be held by the Settlement Agent for repairs or the payment of water, fuel, or other utility bills that cannot be prorated between the parties at closing because the amounts used by the seller prior to closing are not yet known at closing. Subsequent disclosure of a revised Closing Disclosure after the repairs are made or the utility bill is received is optional. (Comment 38(k)(2)(viii)-3)
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The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.
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#2066168 - 02/25/16 10:14 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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Deny the loan for collateral and have them come back when they are done.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2066181 - 02/25/16 11:23 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Dec 2013
Posts: 1,399
CA
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That would certainly make it easier I'm not sure the department (or customer) would like that answer though. Might wind up happening anyway (happens more often than not when a major repair is needed).
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The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.
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#2090035 - 07/26/16 08:08 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Dec 2013
Posts: 1,399
CA
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So, I'm resurrecting this thread. According to Truffle, repairs required to be completed as a condition of the loan must be disclosed.
Can anyone point me to guidance on repairs in the reg, guides, or Outlook live events? Thank you!
_________________________
The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.
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#2090122 - 07/27/16 03:17 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Dec 2013
Posts: 1,399
CA
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For instance, in a refi - roof repair is required - does is need to be disclosed, and if so, does it go in section H, or does a list of providers need to be sent and repair disclosed in section B or C, respectively?
Thank you Randy!
_________________________
The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.
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#2090126 - 07/27/16 03:23 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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Are the repairs a requirement of getting the loan and they have to be completed before the loan is made? If they are, then it would be in Section B or C, as applicable. If you are doing a hold-back for the repairs, refer to the CFPB Construction Loan webinar.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2131647 - 05/24/17 02:10 PM
Re: Repairs and Seller Credits
rlcarey
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Diamond Poster
Joined: Oct 2015
Posts: 1,668
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Resurrecting again because there is some conflicting information on where to put repairs that become a condition of getting the loan. One poster indicated you would not want to refer a contractor because of the risk that you are verifying their ability to do a good job. The last post indicated you would put a repair contractor as a shoppable service (Section C), or the lender would even employ one themselves (Section B).
What if the repair is not a condition of getting the loan but we are aware of the cost and who is doing the work? Is this a Section H fee, or is it just something to be left off the TRID disclosures? Borrower is getting a barn painted and paying for it prior to closing. Reinspection is being done prior to closing by an appraiser to verify barn was painted.
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#2131649 - 05/24/17 02:20 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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Reinspection is being done prior to closing by an appraiser to verify barn was painted.
Then how is this not a condition of the loan if you are getting your appraiser back involved? Why does the bank care?
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2131650 - 05/24/17 02:22 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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If the borrower is paying for the barn painting and there will be a reinspection done by the appraiser before closing, it sure sounds like a condition of the loan to me.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#2131655 - 05/24/17 02:27 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Oct 2015
Posts: 1,668
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Yes, it is in fact a condition. So, where does it go on the disclosures? For information sake, where would it go if not a condition?
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#2131670 - 05/24/17 02:58 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Nov 2002
Posts: 20,654
The Swamp
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Borrower is 'getting' the barn painted...why? Because you say so? Apparently, if you are requiring an inspection of it! How bizarre! I sure wouldn't want to touch a 'shopping' list for something of that nature for the reasons you state above! !
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#2131704 - 05/24/17 04:34 PM
Re: Repairs and Seller Credits
ComplianceOK
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Diamond Poster
Joined: Oct 2015
Posts: 1,668
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So, if it becomes a closing cost in connection with the loan and we need to show in Section C, then we would need to provide an updated WPL/SSPL giving the borrower an example of who would perform the service. What if the borrower already "shopped" and selected the provider. Do you still need to give a list of available service providers? At the point we became aware of the fee, the borrower had already contracted with the painter to do the job (Supposedly).
Last edited by Justin C.; 05/24/17 04:38 PM.
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#2131706 - 05/24/17 04:47 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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At the point we became aware of the fee, the borrower had already contracted with the painter to do the job (Supposedly).
A little far fetched I think. Someone from the bank had to tell them this needed to happen to get the loan. Who ever told them thought it was not going to cost anything?
I guess I am a little confused as to what a coat of paint on a barn really has to do with valuing the property?? There is something not quite right with this situation.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2131766 - 05/24/17 06:48 PM
Re: Repairs and Seller Credits
RR Joker
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Diamond Poster
Joined: Oct 2015
Posts: 1,668
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RL - Yeah, I don't know. They don't come to me before they do these things . They just come to me when they need help disclosing the fee. RRJoker - Yeah, that's where I'm going with it as well. They should have known about it when they did the reinspection fee. It sounds like they knew about that a couple weeks ago, so they missed the three day window. I this is a Section C fee, then I believe we are in trouble from a tolerance standpoint.
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#2131779 - 05/24/17 07:20 PM
Re: Repairs and Seller Credits
ComplianceOK
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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Sounds like you bought several gallons of barn paint
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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