I am receiving a compliance fail from my compliance software for a HPL violation on a loan. The loan officer is asking if we can move the discount points on the loan to "paid by seller" in order to alleviate the HPL violation. I tested it and it does work and my compliance software removes the violation. However, before I proceed I am curious if anyone has ever done this before and if it is allowable? Consider that I do not service my loans so they are sold immediately after origination.

Do you have a signed 3-party agreement that will transfer the obligation for the discount points from your borrower to the seller?

Yes, the purchase contract does provide that verbiage and it is executed. I have done this before for items that give me a QM violation just not for HPL.

Richard - I have always had the same impression of that requirement, however the CFPB has sort of blown a hole in that, either intentionally or unintentionally with the latest round of commentary for the TRID regulations. A creditor has the option of not indicating that the borrower is responsible for a specific charge, if the seller has agreed to pay for specific items, without the bank being involved in the agreement.

2. Seller credits for specific charges. To the extent known by the creditor at the time of delivery of the Loan Estimate, specific seller credits, i.e., seller credits for specific items disclosed under § 1026.37(f) and (g), may be either disclosed under § 1026.37(h)(1)(vi) or reflected in the amounts disclosed for those specific items under § 1026.37(f) and (g). For example, if the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay half of a $100 required pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $50 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose the required pest inspection fee as $50 under § 1026.37(f), reflecting the specific seller credit in the amount disclosed for the pest inspection fee. If the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay the entire $100 pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $100 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose nothing under § 1026.37(f), reflecting that the specific seller credit will cover the entire pest inspection fee.

Thanks for the feedback.