Good afternoon!

We have a borrower that we are doing a homestead 1st lien purchase. Another lender is doing the 2nd lien purchase loan. Therefore we have 2 Closing Disclosures. Obviously each lender has their own fees and the borrower needs to bring cash to closing for each loan (ours is $90k and the 2nd is $1k). The officer wants me to, in Section L of our CD, lower the loan amount of the 2nd lien the amount of the closing costs for the 2nd lien so that the Cash to Close on our CD is the amount the borrower needs to bring for both loans. The 2nd lien CD would be left as-is. This might be right, but I really wish I had some regulation to back that up. I can't find anything (it might be right in my face and I can't see it), but does anyone know if this is correct? It seems to me that since there are 2 transactions, there should be two correct CDs. Is this doable?

Thank you!
Monica

The second lien needs to be disclosed on the 1st lien loan as required by the regulations - it would be the net amount coming over. See Model H-25(C). https://www.ecfr.gov/graphics/pdfs/er31de13.055.pdf

Okay, so in my case, the second lien is $102,000. The closing costs on that loan are $1000, so my amount on the CD will be $101,000?

Sorry, for some reason I'm having a hard time wrapping my brain around this one.

That would be correct. The borrower would not bring any cash to the subordinate lien closing and the net amount would be transferred to the first lien. The subordinate lien CD would show a net $0 as cash to close.

Then on the first lien:

Paragraph 38(j)(2)(vi).

2. Subordinate financing proceeds on first-lien Closing Disclosure. Any financing arrangements or other new loans not otherwise disclosed under § 1026.38(j)(2)(iii) or (iv) must be disclosed under § 1026.38(j)(2)(vi) on the first-lien Closing Disclosure. For example, if the consumer is using a second mortgage loan to finance part of the purchase price, whether from the same creditor, another creditor, or the seller, the principal amount of the second loan must be disclosed with a brief explanation on the first-lien Closing Disclosure. In this example, the principal amount of the subordinate financing is disclosed on the summaries of transactions table for the borrower's transaction either on line 04 under the subheading “L. Paid Already by or on Behalf of Borrower at Closing,” or under the subheading “Other Credits.” If the net proceeds of the subordinate financing are less than the principal amount of the subordinate financing, the net proceeds must also be listed, and may be listed on the same line as the principal amount of the subordinate financing on the first-lien Closing Disclosure. For an example, see form H-25(C) of appendix H to this part.

All right, this helps tremendously. The lender for the 2nd lien is not zeroing out their CD and I asked them to, but they said it wasn't necessary. Now I have something to point to in regulation. I was looking and looking and couldn't find it. I appreciate your help!

Monica