If we collect a long term lock fee POC when the borrower locks the interest rate but want to credit the fee back to the borrower at closing, where should the refund be disclosed? Originally I thought it would be a general lender credit for the POC amount, but the CFPB FAQs state that amounts the creditor collects from the consumer, holds for a period of time, then applies to cover closing costs are not a lender credit.

So I was thinking that we should show the credit in Section L of the CD under Other Credits but that seems to be for credits from any party other than the seller or creditor. Could it go in that section since the CFPB has established it is not a lender credit?

I suggest listing it as a separate negative cost in the borrower at closing column in the same section where you will list the amount the borrower paid in the before closing column. Looks like it will be section A. The math of the form makes that a credit to the borrower that will flow through to the cash to close/at closing section. Label the negative amount a "Refund of long term lock fee."

Thank you John for that suggestion. I didn't think about that.

I want to revive this thread with a very similar question. If we collect an appraisal fee on a refinance of $600 from the borrower POC but the appraisal ends up only being $450. Since the CFPB says I can't disclose that extra $150 as a lender credit, how can I disclose that $150 credit on the refinance CD. Our LOS will not allow us to put a negative cost on the CD.

For a purchase I think I would disclose the credit in Section L on page 3 under Other Credits, but the refinance CD does not have that section. I am not sure applying the $150 to another specific closing cost is the correct way to do it either. I am curious how others handle this scenario. Thanks.

1. Get an LOS that allows negative costs where appropriate, or

2. In the case of a refinance, use the Payoffs and Payments schedule option shown in Model Form H-25(E), page 3. Include the refund of the overcharge as a negative amount. Describe it as "Refund to borrower of overcharge for appraisal." If you can't use a Payoffs and Payments schedule or can't use a negative amount in the schedule, see #1.

Thanks John! I was thinking about disclosing it on the Payoffs and Payments schedule. I saw where the regulation allowed principal reductions to be disclosed there but I wasn't sure about a general refund or credit.