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#2226253 - 11/25/19 02:50 PM Specific Credits for Fees POC
TimTamTom Offline
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Joined: Aug 2016
Posts: 13
When a borrower pays a fee outside of closing and the Lender ends up providing a specific lender credit to cover, how would you properly reflect that on a CD?

1026.38(h)(3)-1 states that "if such credit is attributable to a specific loan cost or other cost listed in the Closing Cost Details tables, pursuant to § 1026.38(f) or (g), that amount should be reflected in the Paid by Others column in the Closing Cost Details tables under § 1026.38(f) or (g)."

However, if we only show a lender credit in the paid by other column, the line item won't reflect that the borrower did previously pay outside of closing. Meaning that cost is essentially hidden and the borrower is not reimbursed, since the Paid by Other column doesn't subtract from the total loan costs.

There are two choice that make sense mathematically:(1) disclose in the paid by other column, keep the cost in the POC by the borrower column as well and show a negative value in the PAC for the borrower. This will attribute a specific credit in the paid by other column, plus reimburse the borrower. (2) add a general lender credit in section J of the CD.

Option 2 appears to be called out as NOT the way to do it in the aforementioned citation. However, I can't find anything in Reg Z that suggests option 1 (showing a negative in the PAC by the borrower) would be acceptable.

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#2226322 - 11/26/19 11:58 AM Re: Specific Credits for Fees POC TimTamTom
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It is not really specifically addressed, but I would go for Option 1 also.
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