We are the creditor in secondary market loans in which we fund the loans and close in our name. The purchasing investor charges us an underwriting fee as they underwrite each loan they intend to purchase. We, in turn charge the borrower for this fee which the investor deducts from our YSP after closing. Title companies closing the loan want to state to whom the fee is payable when completing the CD. My question is therefore should this fee be shown as paid to the investor in Section A since they are the ultimate recipient or should it be paid to us since we are passing this change onto the borrower that the investor charges us.

My thought is it is not reflected on the LE/CD. This is a secondary market cost and should be considered a cost of doing business; if collected anywhere, it would be part of any Origination Fee charged in Section A.

this thread seems to lean to Section A for fees of this type. Would love to see other opinions on this topic.

If this is paid to the secondary market investor and you are passing this on to the borrower, then this is Section B fee payable to the investor. They are not an originator/broker on this loan, so it would not be a Section A fee.

But surely a Secondary Investor fee is not a charge associated with the settlement of the transaction between the consumer and the creditor. The creditor anticipates selling the loan on the secondary market, but that would be their cost of doing business, so they should be addressing as part of any origination fee.

I am only going by what the OP said:

"The purchasing investor charges us an underwriting fee as they underwrite each loan they intend to purchase. We, in turn charge the borrower for this fee "

They are passing the charge directly to the borrower.

Fair enough!

What if the loans ends up having some defect (i.e., doesn't meet all underwriting requirements) so not able to be sold to the investor so no fee paid to the investor, does this fee need to be refunded back to the borrower?

How can you charge a underwriting fee for something that happens post closing? Unless you are talking about a whole different scenerio.