Is this the proper way to handle up-front MIP?

Purchase Loan - Up-front mortgage insurance is added as a cost in Section B and then deducted from the Cash to Close by reducing the down payment Down Payment/Funds from Borrower; thus excluding the up-front mortgage insurance premium from Estimated Cash to Close.

Purchase Loan - If the Total Loan Amount is higher than the sales price, then the up-front mortgage insurance premium is added as a cost in Section B and deducted from the cash to close by including the premium amount in Closing Cost Financed, thus excluding the up-front mortgage insurance premium from Estimated Cash to Close.

For FHA loans, we are disclosing the UFMIP in Section B and also as a positive number in the Down Payment/Funds from Borrower line in the Calculating Cash to Close table. This appears to be correct per the regulation; however, when the loan amount is higher than the sales price (i.e. VA or RD loans), this doesn't seem to work in my interpretation of Reg Z.

We disclose the VA funding fee (or RD Guaranty Fee) in Section B and it's also financed (added to the loan amount). Right now our LOS is disclosing the funding fee/guaranty fee as a negative amount in the "Closing Costs Financed" line of the "Calculating Cash to Close" table. This appears to be inaccurate per 1026.37(h)(1)(ii)-1. "Closing Costs Financed" would be $0 in this case since the VA Funding Fee is already disclosed in Section B.

The other option would be to put the VA Funding Fee (or RD Guaranty Fee) in the "Down Payment/Funds from Borrower" field like we do for FHA loans. The problem is that 1026.37(h)(1)(iii)-1 requires this field to be $0 in this scenario since the loan amount exceeds the purchase price.

In my opinion, the regulation does not appear to have a place for the VA Funding Fee or RD Guaranty Fee in the Calculating Cash to Close table when the loan amount exceeds the purchase price, but I'm not sure if this is what the regulators intended. My interpretation is that the estimated cash to close would be inflated by the amount of the VA funding fee since it doesn't belong in the "Closing Costs Financed" or "Down Payment/Funds from Borrower" fields; however, I think this is confusing for the consumer.

I'd appreciate any feedback if anyone agrees or disagrees.

37(h)(1)(iii) Downpayment and other funds from borrower.

1. No downpayment or funds from borrower. When the loan amount exceeds the purchase price of the property (other than a construction loan), the amount of $0 is disclosed under § 1026.37(h)(1)(iii).

Does anyone have any thoughts on this issue?

I'm not sure how the payment of the fees can be considered a deposit. If they are paid outside of closing they would be shown as POC. These are settlement costs - are they not??

We haven't been including the funding fee in the Deposit line of the CCTC table. At least in our case, the funding fee is not paid outside of closing. It's financed in to the loan amount, which is why the loan amount is higher than the purchase price.

ahou, we just came across this FAQ from the May 26, 2015 CFPB webinar that clarifies:

Question: Comment 1 to Section 1026.37(h)(1)(ii) indicates that the amount disclosed is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed as Loan Costs or Other Costs. Some fees that are considered to be financed are already disclosed as Loan Costs. However, if these amounts are not considered financed, then the total Cash to Close would be too high because the financed fees are not subtracted. Can you please clarify?

Answer: See 1026.37(h)(1)(ii), comment 37(h)(1)(ii)-1, 1026.19(e)(3), 1026.17(c).
The standard calculating cash to close table is very specific as to how items are calculated. As set forth in Comment 37(h)(1)(ii)-1, the closing costs financed is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed as loan costs or other costs. Accordingly, the closing costs financed must determine which payments are applied towards the loan amount first, and it does so by deducting from the loan amount the amount of payments to third parties that have not yet been disclosed on the loan estimate.
CFPB has received a number of questions regarding what constitutes third party charges not otherwise disclosed. These are third party charges not disclosed on the LE—this can include the sales price in a purchase transaction, a construction contract for a construction loan, state tax liens, credit card balances, phone payoffs, and any other third party charges that may not be fully known to the creditor at the time the LE is provided. Therefore they will not be disclosed pursuant to the best information reasonably available standard. Accordingly, if the amount is disclosed as a loan cost or other cost, it would not be included as part of this calculation. If there are no amounts left over to pay those charges that are disclosed, then -0- is disclosed as closing costs financed, and as a result of the calculation will be a negative number. When there are amounts that exceed these charges, then the closing costs financed is equal that difference, capped by the amount of total closing costs.
Note that the amount disclosed in the calculating cash to close table are not subject to the analysis under 1026.19(e)(3); they are only subject to the basic standard that the creditor make the disclosures based on the best information reasonably available at the time the LE is provided under section 1026.17.
[The CFPB slide sets forth the following slide—“Comment 37(h)(1)(ii)-1: The amount of closing costs financed disclosed under § 1026.37(h)(1)(ii) is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed pursuant to § 1026.37(f) and § 1026.37(g) from the total loan amount disclosed pursuant to § 1026.37(b)(1). If the result of the calculation is a positive number, that amount is disclosed as a negative number under § 1026.37(h)(1)(ii), but only to the extent that it does not exceed the total amount of lender credits disclosed under § 1026.37(g)(6)(ii). If the result of the calculation is zero or negative, the amount of $0 is disclosed under § 1026.37(h)(1)(ii).”]

We were recently cited by our QC company that we are disclosing up front mortgage insurance that is financed incorrectly. Would like to resurrect this thread.

Currently we disclose the Upfront mortgage insurance in closing cost column B and then disclose that premium in the Cash to Close table under Closing Cost financed as a negative number.

Can anyone tell me if this is correct? We have been disclosing this way for over 3 years and have never had an issue until now, so comments would be greatly appreciated.

They are still insisting that we are incorrect in our disclosure. Can anyone help.

Up-front MTG ins is 2492.00 which is being financed.
Loan amount 144892
Down payment-Gift funds 7500

You don't give us near enough information to determine who is correct. Just because MIP is involved in a transaction, that alone has no impact on the disclosure of the Closing Costs Financed. You calculate it the same way on every single loan.

1. Calculation of amount. The amount of closing costs financed disclosed under § 1026.37(h)(1)(ii) is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed under § 1026.37(f) and (g) from the loan amount disclosed under § 1026.37(b)(1). The estimated total amount of payments to third parties includes the sale price disclosed under § 1026.37(a)(7)(i), if applicable, unless otherwise excluded under comment 37(h)(1)-2. Other examples of payments to third parties not otherwise disclosed under § 1026.37(f) and (g) include the amount of construction costs for transactions that involve improvements to be made on the property and payoffs of secured or unsecured debt. If the result of the calculation is zero or negative, the amount of $0 is disclosed under § 1026.37(h)(1)(ii). If the result of the calculation is a positive number, that amount is disclosed as a negative number under § 1026.37(h)(1)(ii), but only to the extent that the absolute value of the amount disclosed under § 1026.37(h)(1)(ii) does not exceed the total amount of closing costs disclosed under § 1026.37(g)(6).

Apologies for lack of info. Please let me know if more information is needed.

The sales price is 149,900
Loan amount 144,892
We are disclosing UPMIP on page 2 under B ($2,492)
Total closing cost 6932.82
closing cost financed -$2,492
Down pmt/Gift funds $7500.00
Seller credits -$4,440
Adjustments and other credits -7,850