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#2156124 - 12/05/17 06:12 PM re lender credit
Mike T Offline
Member

Registered: 12/05/16
Posts: 64
Scenario: Initial LE was sent out with lender credit of $3000. However, when it came time to lock the loan, 2 weeks later, pricing was different. In which case it was locked with no credit. The locked LE went out with no credit provided. The argument provided to me was that the rate was floating so the credit disclosed on the initial loan estimate would have no relevance. Are they right??

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TRID - TILA/RESPA Integrated Disclosures Rule
#2156134 - 12/05/17 08:20 PM Re: re lender credit [Re: Mike T]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 64221
Loc: Galveston, TX
Who locked the loan?? The bank or the borrower through a written rate lock agreement. If just the bank, you can't get rid of the lender credit. You would adjust the interest rate accordingly.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2156210 - 12/06/17 10:55 AM Re: re lender credit [Re: Mike T]
Due Dili Offline
Junior Member

Registered: 09/26/06
Posts: 42
Loc: Chicago, IL
The rule states that a rate lock is a valid change in circumstance to adjust interest rate dependent charges. The rule also explains that lender credits are the opposite of discount points. Thus if discount points can be adjusted based on the locking of the loan, then so can credits. We do this all the time and have not been challenged on it.

To Randy's point, if the borrower signed a rate lock agreement then the rate is locked regardless of whether or not the bank actually locked it.
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#2156240 - 12/06/17 12:08 PM Re: re lender credit [Re: Mike T]
Mike T Offline
Member

Registered: 12/05/16
Posts: 64
We locked the rate, not the borrower. So please advise.

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#2156247 - 12/06/17 12:33 PM Re: re lender credit [Re: Mike T]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 64221
Loc: Galveston, TX
Then you should adjust the interest rate on the loan to preserve the $3,000 lender credit. What you do between the bank and investor has no impact on your obligation on how to treat fees and lender credits provided to the borrower on the original LE.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2156421 - 12/07/17 10:35 AM Re: re lender credit [Re: Mike T]
Due Dili Offline
Junior Member

Registered: 09/26/06
Posts: 42
Loc: Chicago, IL
Yes, rate lock as it applies to this scenario is the lenders agreement with the borrower. The LE has fields to disclose whether or not the rate is locked with the borrower. Once you send them an LE indicating their rate is locked and an expiration date of that lock, you are locked into that rate and credit.

Unless one of two things occur; 1. the rate lock expires, 2. the borrower is declined for eligibility and counter offered with a new offer.

You can also add discount to buy down the rate as long as it is bonafide (one quart point rate reduction for every 1 point of discount charged.)
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#2156427 - 12/07/17 10:54 AM Re: re lender credit [Re: Mike T]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 64221
Loc: Galveston, TX
Unless one of two things occur; 1. the rate lock expires,

Yes, I agree

2. the borrower is declined for eligibility and counter offered with a new offer.

This will all depend on the contingencies placed in the written rate lock agreement and under what circumstance that are outlined in the agreement under which the lender can terminate the agreement.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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