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#2162702 - 02/01/18 01:35 PM Rate Lock Fee - LE/CD
Shih_Tzu_Lvr Offline
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A bank charges a rate lock fee and refunds this fee at closing. Where should this fee be shown on the LE and CD?
And it should be a prepaid finance charge on the LE, but if it is refunded is that still true for the CD?

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#2162810 - 02/01/18 09:15 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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You would have to show it as a charge and a general lender credit on both and yes, it would be a finance charge.
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#2176757 - 05/04/18 06:50 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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For clarification purposes - would the rate lock fee be shown in Section A, with a Lender Credit in the Calculating Cash to Close box and the fee be included in the APR calculation on the LE?

If the fee is collected after obtaining an Intent to Proceed and is only "refunded" if the loan closes, is it shown in the Borrower Paid Before Closing column on the CD, with the Lender Credit, the same column, or if not where do we show it?

If the bank refunds the fee at closing, is it still included in calculating the APR, even though the customer is fully reimbursed for this fee?

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#2176803 - 05/04/18 07:55 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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If the borrower is paying this fee before closing than it will show as borrower paid before closing and a general lender credit will be provided in Section J.
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#2176808 - 05/04/18 08:18 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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What about including it in the APR calculation for the CD if the customer will ultimately be refunded the fee at closing?
Is it left out or not?

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#2176814 - 05/04/18 08:26 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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You cannot offset APR fees with a general lender credit.
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#2176817 - 05/04/18 08:31 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
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What if the Lender Credit is specific to the rate lock fee? It is not a General Lender Credit.

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#2176840 - 05/04/18 09:45 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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It can't be a specific credit. The borrower already paid for it. How are you going a credit it back to them without putting it in Section J?
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#2176842 - 05/04/18 10:01 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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Thus my confusion. We don't charge rate lock fees on our in-house TRID covered loans, so I have not had to deal with this type of situation up to this point.

This is a new special program in our mortgage department for long term rate locks on new construction deals where they are providing the perm financing to sell to the secondary market, once the house is completed. The locks are for 120 or 180 days and the fee is a % of the loan amount - starting at .25% - ex $625 on a loan amount of $250,000.

Our Loan Originator keeps calling it a "deposit", where the funds are held in a separate GL account, to be given back at closing with a credit for the same amount as the rate lock fee. She considers it like an earnest money deposit (doesn't sound right to me).

Is Section J only used for General credits, which would be the reason that the rate lock fee is included in the APR calculation no matter whether they are refunded the money or not?

I really appreciate all your help Randy!

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#2176847 - 05/04/18 10:15 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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When you issue the LE for the permanent loan, since you are going to collect the fee from the borrower, it has to be shown as borrower paid. Once they pay it, then is has to be shown as paid before closing by borrower. The only way to show the refund would be to provide them a general lender credit in Section J. Specific lender credits would be shown as paid by others (L). But if you show it that way on the CD, they really don't get the money back at closing.

Just curious, I assume that none of this happens until the LE is issued for the permanent loan and you get an intent to proceed on the permanent loan from the borrower.
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#2176891 - 05/07/18 01:51 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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Correct. We get the Intent to Proceed first.

Bottom line on all this is that the rate lock fee is included in the APR calculation no matter what, right?
I know the LO is going to ask, so want to be clear on this.

Thanks again for your help!

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#2176928 - 05/07/18 03:04 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
Truffle Royale Offline

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Curious...you're issuing an LE on the permanent (end) loan with a rate locked in for a closing six months from now?
We don't have this type of construction/perm product so I truly am curious how this works.

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#2176987 - 05/07/18 04:49 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
Docs Offline
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Am also curious. Locks for that long get very expensive in the secondary market, so assume it is a portfolio loan?
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#2177062 - 05/07/18 09:05 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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We are just providing the perm financing to the end buyer. The builder has the construction loan for a pre-sold house. It is not a portfolio loan.
This is a brand new program for us. The loan originator works with several builders in the city where our branch is located (in another state) and had this type of program at her former employer. That's why I'm trying to make sure we are disclosing properly.
We don't lock the rate on any of our in-house portfolio loans.
We don't normally charge a rate lock fee for a standard secondary market purchase or refinance loans originated in our mortgage department.

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#2177066 - 05/07/18 09:33 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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So what are they locking if you do not do locks? What sort of written lock agreement are they signing? I assume your legal counsel is involved setting up this new product?
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#2177184 - 05/08/18 04:19 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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I was just stating that we do not lock the rates on our in-house loans. The mortgage department has rate lock agreements for regular transactions that will close in the standard time frame of 30-45 days, where an extended time frame is not necessary.

The new long term rate lock program is only being offered by our mortgage department for end buyers on newly constructed homes where the house won't be completed for 120 to 180 days from their application for a perm loan.

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#2269489 - 04/21/22 08:23 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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Reactivating this string.
We have had this topic come up once again on how to show a Refundable Extended Rate Lock Fee on the LE.

Is it just shown in Section A on the LE and then shown as a Lender Credit on the CD? Or do we also show an offset as a Lender Credit in Section J or Deposit in the Calculating Cash to Close box on the LE?

The customer provides a check for the rate lock fee amount that is then placed in an account to hold until the loan closes. If it closes prior to the expiration of the lock, the fee is refunded. If they do not close by the expiration date of the lock, the fee is retained. (disclosures are provided to explain this).

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#2269504 - 04/22/22 01:27 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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Show it as a lender credit or cut them a check before closing and not show it at all on the CD. Just like an overpayment of an appraisal that you are refunding.
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#2269505 - 04/22/22 01:40 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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So, do we just show it in Section A on the LE? That's what I really need clarification on. Thanks!

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#2269508 - 04/22/22 01:47 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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Well, if there is a situation on which you would keep the money and not refund it, you would have to, as it is a 0% tolerance item.
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#2269518 - 04/22/22 02:17 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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Okay. I understand the 0% tolerance, but want to make sure we don't show an offset anywhere else on the LE and that the "refund" will just be shown on the CD.

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#2269519 - 04/22/22 02:19 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
rlcarey Online
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How can you possibly know that there is going to be a credit at the time you issue the LE?
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#2269524 - 04/22/22 02:46 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
julesbok Offline
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Okay. Thanks for your help.

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#2269641 - 04/26/22 05:34 PM Re: Rate Lock Fee - LE/CD julesbok
Compliance1 Offline
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I am glad this thread was opened again as we are now looking at locking our rates and charging .25% of the loan amount. I was questioning if we could even charge a fee to lock the rate and how this type of fee is different than collecting an appraisal fee, for example, up front.

Administration is wanting to collect the .25% and then apply it to the customer's loan closing fees on the CD. Would this then be shown as a lender credit as well?

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#2269675 - 04/26/22 08:24 PM Re: Rate Lock Fee - LE/CD Shih_Tzu_Lvr
John Burnett Offline
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If it's applied as a lump sum applicable to more than one closing fee, yes, show it as a general lender credit in section J, which also flows into the Costs at Closing table on page 1. You will show the 0.25% of the loan amount as a rate lock fee (if that's what it's used for) in the Borrower-Paid column, before closing (assuming it's paid before closing).

You could, I think, break the amount up and use specific credits in the Paid by Others (L) column for specific costs until the credit amount is used up. That would avoid stating the full lender credit amount in section J or as part of the Costs at Closing table.

I haven't seen this done, but I wonder whether you could use two lines in section A. On the first line, show the "rate lock fee" in the Borrower Paid before closing column. Then, on another line in Section A (in alphabetic order with the other entries in the section) show "Refund of Rate Lock Fee" and put the amount of the fee as a negative number in the Borrower-Paid at closing column and as a positive number in the Paid by Other (L) column on the same line.

If someone knows that either of the last two methods can't be used, comment away. Both are sort of trial balloons.
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