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#2173516 - 04/13/18 04:33 PM Addition of Fee after CD but seller will credit it
CMSIngenue Offline
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Registered: 01/31/13
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A discount point is added after initial CD is issued b/c borrower wants to reduce their interest rate. This is a purchase. Seller will pay for discount points. Is it okay to show the discount point as seller paid or would lender have to issue a credit for tolerance cure violation?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2173527 - 04/13/18 04:51 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
rlcarey Offline
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If the seller is specifically paying the discount point, it would be reflected as Paid by Seller - why would there be a cure?
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#2173528 - 04/13/18 05:00 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
CMSIngenue Offline
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Registered: 01/31/13
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This is a Zero Tolerance Fee. CD was already issued reflecting no discount points. Now Seller is offering to pay discount points to lower interest rate. We do not generally permit the addition of discount points after CD has been issued. Would this not be a cure normally?

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#2173532 - 04/13/18 05:07 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
rlcarey Offline
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If they are placed as Seller Paid, how does that generate a cure?
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#2173543 - 04/13/18 05:49 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
John Burnett Offline

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The buyer and seller changed the terms of their agreement before closing. You are lowering the rate and charging discount points to the seller. Issue a revised closing disclosure showing the correct rate and other terms, and put the added discount points in the seller-paid column. The math will work its way through the form, and there won't be a tolerance violation or cure.

Remember that the calculation of differences is between the costs on the loan estimate (as revised, as applicable) and the actual costs paid by the borrower. Costs paid by anyone other that the borrower don't matter in that calculation of differences.
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#2173567 - 04/16/18 07:52 AM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
John Burnett Offline

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Caution, however. Some lenders will make the mistake of disclosing this fee in this circumstance in the borrower-paid column (because it's normally a buyer-paid cost), and then showing a seller credit to the borrower. While that is one way to disclose it, it WILL create a tolerance violation and cure payment via a lender credit.

In this case, we are told that the seller has agreed to pay that cost, so record it as a seller-paid cost so that the buyer isn't charged for it, and you're home free without a tolerance problem and without any need for a cure payment.
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#2173580 - 04/16/18 09:06 AM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
RR Joker Offline
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I will also add that it's possible you receive a tolerance warning through your software and it's up to you to know whether it truly is a tolerance or not. The computer cannot always tell, but will give you a warning so that you don't overlook an actual issue.
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#2173817 - 04/17/18 12:25 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
BA13 Offline
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Registered: 07/22/16
Posts: 62
If there was a lump sum general seller credit to offset various fees adding up to that amount and not a specific charge being paid by the seller, it would be in the tolerance test, correct?

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#2173980 - 04/18/18 09:41 AM Re: Addition of Fee after CD but seller will credit it [Re: BA13]
John Burnett Offline

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Originally Posted By BA13
If there was a lump sum general seller credit to offset various fees adding up to that amount and not a specific charge being paid by the seller, it would be in the tolerance test, correct?
Yes. The comparison for testing for tolerance violations will be between the cost estimates you have made via loan estimates and the actual costs paid by or assessed on the consumer. If your closing disclosure shows that the consumer paid $500 for the discount point, but received a seller credit of $750 total that "reimbursed" the consumer for the discount point and for a $250 radon-abatement service, and the discount point wasn't previously disclosed as a cost to the consumer, there will be a $500 tolerance cure (all other things being equal).

Caution here: The finance charges and APR on the loan must reflect the contractual obligation between the consumer and the lender. My understanding here is that the discount points will typically be a borrower obligation, and would be included as a PPFC, and thus be reflected in the APR. Only if there is a legal commitment to the lender on the part of the seller to pay the discount points would they be excluded from the finance charge. Your LOS may not be able to handle the discount points correctly if they are carried in the seller-paid column of the closing disclosure.
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#2174013 - 04/18/18 10:51 AM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
John Burnett Offline

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After pondering this a bit and contacting someone closer to the real world than I am, I don't thing there is a system out there that will treat any seller-paid costs as a finance charge. If that's correct, if the seller in the original scenario isn't legally committed to paying you, the lender, those discount points, you'll need to disclose them as borrower-paid and show a seller credit. That will push you over into a tolerance violation and a lender-credit cure. That will mean the buyer not only doesn't pay the cost, but gets reimbursed for them, too. Reminiscent of pre-TRID HUD-1 cures.
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#2174152 - 04/18/18 04:23 PM Re: Addition of Fee after CD but seller will credit it [Re: CMSIngenue]
Vive Accommodare Offline
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Registered: 04/11/13
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From the original question though, if the borrower is requesting to lower their rate by paying a discount point, why wouldn't you be able to add it in? It is after all a borrower-requested change, correct?
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