This is a new scenario for us so want to make sure we’re handling it appropriately under the TRID rules. We are at the point where we want to generate our Closing Disclosure.
1) A seller credit is being given towards a termite report ($1,000).
2) Termite report came in showing repairs that must be done. Borrower will pay for these repairs out-of-pocket. We don't know what that will cost yet. (Do we need to?)
3) Borrower is being asked to bring CASH to escrow of $5,000. Escrow will hold the cash for 30 days until the repairs are made and then release the funds back to the borrower.

My thoughts are that we continue to show the $1,000 Seller Credit on our Closing Disclosure. Since the borrower is paying for the termite repairs outside of escrow (and not with loan proceeds), we do not need to disclose them on our CD?

How do we handle the $5,000 that escrow will hold as security (basically) that the repairs will get done? If we do need to show the $5,000 (since the bank is asking that this be done), how would we show that in our CD? Show it as a "deposit"? Or a "payment"? It is a borrower deposit that may be refunded since borrower is to pay the termite repairs with cash.

Has anyone else dealt with this before?

Before responding, I assume these repairs are a lender requirement in order to grant the loan?

It is a lender requirement - however, we are going to move forward and close the loan which is why the lender wants the $5,000 "deposit" to be held to ensure that the borrower completes the repairs within 30 days. (They don't want to hold up the loan.)

Most likely:

2. Other consumer charges. The amounts disclosed under § 1026.38(j)(1)(v) which are for charges owed by the consumer at the real estate closing not otherwise disclosed under § 1026.38(f), (g), and (j) will not have a corresponding credit in the summary of the seller's transaction under § 1026.38(k)(1)(iv). For example, the amounts paid to any holders of existing liens on the property in a refinance transaction, construction costs in connection with the transaction that the consumer will be obligated to pay, payoff of other secured or unsecured debt, any outstanding real estate property taxes, and principal reductions are disclosed under § 1026.38(j)(1)(v) without a corresponding credit in the summary of the seller's transaction under § 1026.38(k)(1)(iv). See comment 38-4 for an explanation of how to disclose a principal reduction under § 1026.38(j)(1)(v).

Thank you! I appreciate the reference - very helpful!

We have a similar situation, we are escrowing funds for work that needs to be completed. My question is how to handle the inspection fee that will be completed once the work is done. Does that inspection fee need to be listed separately on the CD or can it be listed in the work escrow agreement as part of the disbursement of funds?

If you are asking about a fee that will be collected after the loan closing once the work is done and an inspection required by the bank is completed, I think it would be treated like a construction loan inspection and placed on an addendum (but included in the finance charge (not prepaid) and total of payments.

If the fee is known and will be collected at closing (in advance of the inspection), it will be listed in section B as a closing cost and included as a prepaid finance charge.

house was new construction and with all the snow and rain we had this spring the dirt work, painting and stonework were not completed by closing. we set up a work escrow agreement for the incomplete items and the appraisal inspection fees. What I am wondering is how we should have disclosed the appraisal inspection fees? we did not list the appraisal inspection fees on the LE nor the CD, we only listed the inspection fees in the work escrow agreement. Do we owe the borrower a refund of those inspection fees?

Side note, the borrower indicated work was complete and we sent the appraiser back for the final only to find out the work was not complete. a 2nd final inspection was completed, should we have issued a revised disclose for the 2nd final inspection?

Sounds like all of this was not contemplated when the construction loan originally closed. As such, these are subsequent events that would not invalidate any of your original disclosures or trigger new ones.