I am hoping for just a quick confirmation on this:

LE: total Lender Credit is disclosed under Lender Credits on Pg1.

CD:
- Specific Lender Credits are indicated as "Lender" in the "Paid by Others" column on Pg2;
- if the total of these is less than Lender Credit listed on the LE, the difference is listed as Lender Credits under Costs at Closing on Pg1;
- otherwise, "Lender Credits" on Pg 1 is $0.

Am I missing something?

Specific lender credits are not disclosed on the LE.

The lender credits disclosed under Section J of the LE should match or be less than the total lender credits disclosed under Section J on the CD.

You can't can substitute specific lender credits on the CD for general lender credits disclosed on the LE.

Huh?

5. Lender credits. The disclosure of “lender credits,” as identified in § 1026.37(g)(6)(ii), is required by § 1026.19(e)(1)(i). “Lender credits,” as identified in § 1026.37(g)(6)(ii), represents the sum of non-specific lender credits and specific lender credits.

That's how I was reading that too, Randy, for the LE.

My main question is to confirm that on the CD, it is not supposed to be totaled anymore in that field. Is that right?

My bad. I answered while trying to answer another question while on the phone and got my wires crossed. I edited my reply.

Dan, when you say that "specific lender credits are not disclosed on the LE" do you mean that only general Lender Credits should be disclosed on the LE or that specific ones are not separated from General ones and disclosed as a total? (which is what the citation provided by Randy seems to say).

Also, where on the CD do we put the "total lender credits"?

And "You can't can substitute specific lender credits on the CD for general lender credits disclosed on the LE" again makes it sound like the LE is not actually showing the total lender credits but only the general ones?

I think I am getting more confused...

The LE discloses the estimated costs of the loan that the consumer will pay. If the FI is going to pay for the appraisal, credit report and tax service fee then those fees would not be disclosed on the LE. They would however be disclosed on the CD under the paid by others column.

If we were going to pay the above fees and then provide a $500 general credit towards the remaining closing costs to be paid by the consumer we would not disclose the specific fees to be paid by us on the LE and would disclose the $500 general credit in Section J.

On the CD we would show the specific credits paid by us in the paid by others column and show the $500 general credit in Section J.

Ok, then how does the below fit with not including specific Lender Credits on the LE?


§ 1026.37(g) Closing cost details; other costs. Under the master heading “Closing Cost Details,” in a table under the heading “Other Costs,” all costs associated with the transaction that are in addition to the costs disclosed under paragraph (f) of this section. The table shall contain the items and amounts listed under six subheadings, described in paragraphs (g)(1) through (6) of this section.

(6)Total closing costs. Under the subheading “Total Closing Costs,” the component amounts and their sum, as follows:

(ii) The amount of any lender credits, disclosed as a negative number with the label “Lender Credits” provided that, if no such amount is disclosed, the amount must be blank.

Supplement I to §1026.19(e)(3)(i)
5.Lender credits.
The disclosure of “lender credits,” as identified in § 1026.37(g)(6)(ii), is required by § 1026.19(e)(1)(i). “Lender credits,” as identified in § 1026.37(g)(6)(ii), represents the sum of non-specific lender credits and specific lender credits. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures provided pursuant to § 1026.19(e)(1). Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee. Nonspecific lender credits and specific lender credits are negative charges to the consumer. The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated “lender credits” identified in § 1026.37(g)(6)(ii) and disclosed pursuant to § 1026.19(e) is an increased charge to the consumer for purposes of determining good faith under § 1026.19(e)(3)(i).

(f) Closing cost details; loan costs. Under the master heading “Closing Cost Details,” in a table under the heading “Loan Costs,” all loan costs associated with the transaction. The table shall contain the items and amounts listed under four subheadings, described in paragraphs (f)(1) through (4) of this section.

(1) Origination charges. Under the subheading “Origination Charges,” an itemization of each amount, and a subtotal of all such amounts, that the consumer will pay to each creditor and loan originator for originating and extending the credit.

(i) The points paid to the creditor to reduce the interest rate shall be itemized separately, as both a percentage of the amount of credit extended and a dollar amount, and using the label “__% of Loan Amount (Points).” If points to reduce the interest rate are not paid, the disclosure required by this paragraph (f)(1)(i) must be blank.

(ii) The number of items disclosed under this paragraph (f)(1), including the points disclosed under paragraph (f)(1)(i) of this section, shall not exceed 13.

(2) Services you cannot shop for. Under the subheading “Services You Cannot Shop For,” an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop in accordance with § 1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.

(i) For any item that is a component of title insurance or is for conducting the closing, the introductory description “Title –” shall appear at the beginning of the label for that item.

(ii) The number of items disclosed under this paragraph (f)(2) shall not exceed 13.

(3) Services you can shop for. Under the subheading “Services You Can Shop For,” an itemization of each amount and a subtotal of all such amounts the consumer will pay for settlement services for which the consumer can shop in accordance with § 1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.

(i) For any item that is a component of title insurance or is for conducting the closing, the introductory description “Title – ” shall appear at the beginning of the label for that item.

(ii) The number of items disclosed under this paragraph (f)(3) shall not exceed 14.

(4) Total loan costs. Under the subheading “Total Loan Costs,” the sum of the subtotals disclosed under paragraphs (f)(1) through (3) of this section.

Ok, then how does the below fit with not including specific Lender Credits on the LE?


§ 1026.37(g) Closing cost details; other costs. Under the master heading “Closing Cost Details,” in a table under the heading “Other Costs,” all costs associated with the transaction that are in addition to the costs disclosed under paragraph (f) of this section. The table shall contain the items and amounts listed under six subheadings, described in paragraphs (g)(1) through (6) of this section.

The 6 subheadings under this section do not include any charges required to be disclosed under section (f).


1026.19(e)(3)(i) allows you to combine general and specific credit to determine your good faith compliance. From the Commentary:

6. Good faith analysis for lender credits. For purposes of conducting the good faith analysis required under § 1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the “lender credits” identified in § 1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the “lender credits” identified in § 1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to § 1026.38(f) and (g).


As an example; you disclose $1,000 in Section J of the LE and on the CD you are only disclosing $500 in Section J. Technically you are out of tolerance but you also have $500 is specific credits listed in the paid by other column. You can combine the paid by other specific credits and the section J general credits to calculate your good faith compliance.

So I get that on the Closing Disclosure General and Specific credits can be combined to make sure that we are within the tolerance limits and all the credit that was promised is being given to the borrower.

And on the LE, you are saying we would just not list any of the services that we will be paying for and that is why we would not need to guess what the amount of credit that we give them for those needs to be or list it as such?

I really appreciate your time on this, Dan!

If you know the specific services you will be paying regardless of the cost then why disclose them on the LE when you don't have to? Not disclosing them would eliminate the "guessing" as you put it and could save you from having to provide credit you did not intend to because you over "guessed" the credit on the LE.

The CFPB has failed again to clarify this issue even though ask too in comment letters to the proposed amendments. However, they clarified how to treat specific seller credits on the LE, for example the seller via the purchase contract is paying for the appraisal - you either 1) leave the fee off of the LE or 2) put the fee on with an offsetting seller credit.

I'm not so sure why if that treatment is good enough for specific seller credits, why that is also not good enough for specific lender credits?

So, Dan I agree, as long as it is acceptable to your powers that be.

Getting back to this with a follow-up question.

Lending wants to collect the fees (appraisal, title, etc.) from the borrower up front - they are calling this an "Application Fee" up front.
Then if the loan closes, they "Application Fee" is refunded. If it does not, the money has been used to pay for these services and is not refunded.

So if we don't disclose the fees under Loan Costs (since we are paying those), do we have to still show the fact that this "Application Fee" is being collected somewhere on the LE? And on the CD?

Of course you do. In Section A and it will be a finance charge if you are labeling it as a application fee rather than collecting for specific services, which then those services would be disclosed on the LE in the proper categories and shown as paid before closing on the CD.