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#2179917 - 05/25/18 08:35 PM Sellers RE Agent Commission on Borrowers CD?
MB Guy Offline
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Way, way south.
Hello, found an issue that seems to have mixed feelings in the mortgage loan world regarding disclosing of seller-paid real estate commission on the borrower's CD. CFPB says they have to be disclosed, other industry folks say no. What say you?

As stated, the CFPB i saying that the disclosing of the real estate commission being paid by the Seller should be listed on the Borrower’s CD. It appears that some in the industry see this as a point of contention, but that we've done some research and we agreed with the CFPB.

Per Reg Z (1026.38(g)(4)) referenced below, states the following:

Reg:
(4) Other. Under the subheading “Other” and in the applicable column as described in paragraph (g) of this section, an itemization of each amount for charges in connection with the transaction that are in addition to the charges disclosed under paragraphs (f) and (g)(1) through (3) for services that are required or obtained in the real estate closing by the consumer, the seller, or other party, the name of the person ultimately receiving the payment, and the total of all such itemized amounts that are designated borrower-paid at or before closing.
(i) For any cost that is a component of title insurance services, the introductory description “Title – ” shall appear at the beginning of the label for that actual cost.
(ii) The parenthetical description “(optional)” shall appear at the end of the label for costs designated borrower-paid at or before closing for any premiums paid for separate insurance, warranty, guarantee, or event-coverage products.

Commentary:
38(g)(4) Other.
1. Costs disclosed. The costs disclosed under § 1026.38(g)(4) include all real estate brokerage fees, homeowner’s or condominium association charges paid at consummation, home warranties, inspection fees, and other fees that are part of the real estate closing but not required by the creditor or not disclosed elsewhere under § 1026.38.
2. Owner’s title insurance premium. In a jurisdiction where simultaneous issuance title insurance rates are permitted, any owner’s title insurance premium disclosed under § 1026.38(g)(4) is calculated by using the full owner’s title insurance premium, adding any simultaneous issuance premium for issuance of lender’s coverage, and then deducting the full premium for lender’s coverage disclosed under § 1026.38(f)(2) or (f)(3). Section 1026.38(g)(4)(i) requires that the disclosure of the cost of the premium for an owner’s title insurance policy include “Title – ” at the beginning of the label. In addition, § 1026.38(g)(4)(ii) requires that the disclosure of the cost of the premium for an owner’s title insurance policy include the parenthetical “(optional)” at the end of the label when designated borrower-paid at or before closing.
3. Guidance. For additional guidance on the use of the term “(optional)” under § 1026.38(g)(4)(ii), see comment 37(g)(4)-3.
4. Real estate commissions. The amount of real estate commissions pursuant to § 1026.38(g)(4) must be the total amount paid to any real estate brokerage as a commission, regardless of the identity of the party holding any earnest money deposit. Additional charges made by real estate brokerages or agents to the seller or consumer are itemized separately as additional items for services rendered, with a description of the service and an identification of the person ultimately receiving the payment.

Not sure where they get that it doesn't have to be reported on the CD, but am I missing something?
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#2179919 - 05/25/18 08:38 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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rlcarey
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CFPB says they have to be disclosed - end of story. There is no exclusion from disclosing any closing costs regardless of who is paying on the borrower's CD.
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#2179926 - 05/25/18 09:00 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
MB Guy Offline
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Way, way south.
Even if a separate Seller's CD is issued?
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#2179935 - 05/25/18 11:11 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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rlcarey
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If the "other industry folks" can find support for their claim in this section, I would like to know about it. Under (B) you can leave the closing costs paid by the borrower blank on the seller's CD. There is no provision that goes in the other direction.

1026.38(t)(5)(v) Separation of consumer and seller information. The creditor or settlement agent preparing the form may use form H-25 of appendix H to this part for the disclosure provided to both the consumer and the seller, with the following modifications to separate the information of the consumer and seller, as necessary:

(A) The information required to be disclosed by paragraphs (j) and (k) of this section may be disclosed on separate pages to the consumer and the seller, respectively, with the information required by the other paragraph left blank. The information disclosed to the consumer pursuant to paragraph (j) of this section must be disclosed on the same page as the information required by paragraph (i) of this section.

(B) The information required to be disclosed by paragraphs (f) and (g) of this section with respect to costs paid by the consumer may be left blank on the disclosure provided to the seller.

(C) The information required by paragraphs (a)(2), (a)(4)(iii), (a)(5), (b) through (d), (i), (l) through (p), (r) with respect to the creditor and mortgage broker, and (s)(2) of this section may be left blank on the disclosure provided to the seller.
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#2179975 - 05/29/18 03:00 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
RR Joker Offline
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Yes, commissions show on both Borrower and Seller CD under H "Other". It's a direct cost of the transaction.
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#2180053 - 05/29/18 07:27 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
John Burnett Offline
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It's in the regulation -- plain and simple. The borrower gets to see ALL the costs related to the real estate transaction, regardless of whose costs they are, except the seller transaction entries on page 3.
Last edited by John Burnett; 05/29/18 07:29 PM.
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#2213369 - 05/10/19 07:46 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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Help!
Having an issue with the legal folks right now about this. They are stating the only time they will list in H is if we are paying the commission for the seller out of the loan proceeds? I say it does not matter, the commission fee is listed regards of where the fee is being paid from.
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#2213383 - 05/10/19 09:25 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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Pretty clear in the regulation. They might want to pull the transcripts from the original CFPB webinars also.

1026.38(g) Closing cost details; other costs. Under the master heading “Closing Cost Details” disclosed pursuant to paragraph (f) of this section, with columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others, all costs in connection with the transaction, other than those disclosed under paragraph (f) of this section, listed in a table with a heading disclosed as “Other Costs.” The table shall contain the items and amounts listed under five subheadings, described in paragraphs (g)(1) through (6) of this section.

38(g)(4) Other
1. Costs disclosed. The costs disclosed under § 1026.38(g)(4) include all real estate brokerage fees, homeowner’s or condominium association charges paid at consummation, home warranties, inspection fees, and other fees that are part of the real estate closing but not required by the creditor or not disclosed elsewhere under § 1026.38.

4. Real estate commissions. The amount of real estate commissions pursuant to § 1026.38(g)(4) must be the total amount paid to any real estate brokerage as a commission, regardless of the identity of the party holding any earnest money deposit. Additional charges made by real estate brokerages or agents to the seller or consumer are itemized separately as additional items for services rendered, with a description of the service and an identification of the person ultimately receiving the payment
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#2213388 - 05/10/19 10:11 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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CFPB Webinar April 12 2016

A final related question on slide 25 is about seller-paid real estate commissions and is one that
we often receive. When separate disclosures are provided to the consumer and the seller, must
seller-paid real estate commissions be included on page 2 of the consumer's Closing Disclosure?

MS. AYOUBI: Yes. Seller-paid real estate commissions are one example of seller-paid costs that
may not be omitted from and must be included on the consumer's Closing Disclosure.

As discussed in the response to the previous question number 15, in the Closing Disclosure
provided to the seller, the summary of the borrower's transaction, including loan costs and other
costs paid by the borrower, may be left blank.
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#2213391 - 05/11/19 12:49 AM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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Soccer, what legal folks are giving you a hard time over clear directions from the Reg?

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#2213400 - 05/13/19 11:20 AM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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Thanks Randy!


TR
Paralegals. We do in house closings, very seldom do we have an outside attorney close any of our mortgages.
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#2213428 - 05/13/19 03:01 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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Paralegals should know better. When someone gives me pushback like that I like to use the tried and true "Could you show me in the Reg where it says that? I must have missed it in all my trainings and readings."

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#2213437 - 05/13/19 04:35 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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One additional question.
When the commission is placed in the Paid by Seller at closing column our system adjusts the end amount of monies due to the seller by that amount, which is not correct. When we place it in the Paid by others column all amounts are equal to the checks that are disbursed.

Is this acceptable?
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#2213443 - 05/13/19 04:59 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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I am not sure what you mean?? Is the seller paying them at closing or POC? You close your own purchase loans?
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#2213450 - 05/13/19 05:46 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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For this specific loan we are not cutting the check to the Realtor.
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#2213452 - 05/13/19 06:05 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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Then it is still shown in the Seller's column, just in the "Before Closing" column.
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#2213453 - 05/13/19 06:06 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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That is what we just did.

As always thank you!
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#2214570 - 05/29/19 09:37 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
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I have a question in relation to real estate broker info. One of our credit managers said she spoke with another bank who stated they never disclose the realtor or broker contact information on the last page of the CD, and they have been through an FDIC and state audit and they had no issues. They only list the lender and the settlement agent. She thinks we may be over complying, but my reading of the regulation simply states we must disclose the contact information for parties associated with the transaction. Is anyone using this practice in their institution?

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#2214571 - 05/29/19 09:50 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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One of our credit managers said she spoke with another bank who stated they never disclose the realtor or broker contact information on the last page of the CD, and they have been through an FDIC and state audit and they had no issues.

So another bank is violating Regulation Z and just because they may or may not be getting away with it, they want to knowing have the bank violate it themselves??
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#2214573 - 05/29/19 10:00 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
MusicCityCRCM Offline
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That's exactly what it sounded like to me. Thank you for the verification!

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#2214879 - 06/04/19 03:58 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
John Burnett Offline
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One wonders what that "other bank" will have to say for itself if their FDIC examiners start dinging them for the violations. "You didn't cite me last time" doesn't work.
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#2214888 - 06/04/19 04:13 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
rlcarey Online
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One of the major investors just released a notice to correspondents that if seller costs are noted as not on the buyer CD as of July 1, they are no longer going to buy the loans.
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#2214995 - 06/05/19 02:34 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
John Burnett Offline
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Investor pressure to do this correctly may even be more effective than the threat of exam findings. Thanks for adding that news, Randy.
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#2214997 - 06/05/19 02:40 PM Re: Sellers RE Agent Commission on Borrowers CD? MB Guy
John Burnett Offline
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I'll just add that it's discouraging that this argument is still going on so long after the final word on the matter was given by the Bureau. It's not even a gray area in the regulation.
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