Issue:
Reg Z-TRID rules have requirements banks must follow to determine if a seller credit is disclosed on the CD as a lump seller credit or as individual fees disclosed in the “seller-paid” column on page 2. Per Reg. Z , in order for banks to disclose seller credits as individual fees paid by the seller, the specific fees the seller credit will cover must be stated/outlined in the sales contract. However, if the sales contract only has a general statement, for example, “ the seller will pay up to $5000 (or up to 3%) toward buyer’s closing costs”, we must disclose the seller credit as a lump seller credit on the CD to comply with TRID regulations.

VA requires all seller credits to be disclosed on the CD as individual fees “paid by seller”, regardless if the legal sales contract instructs how the credit is allocated or not.

Summary:
By banks adhering to the CFPB’s TRID rules, there may be instances in which we are not permitted to itemize the seller credit on the CD. However, VA will identify this as a deficiency of its requirements and require banks to provide a refund payment to the borrower for fees in your “unallowable” category. If banks disregard TRID requirements and disclose all seller credits as “paid by seller” on page 2 of the CD; we potentially increase our Regulatory Risk exposure.

Is anyone experiencing this issue? If so, what approach are you using?

Issue:
Reg Z-TRID rules have requirements banks must follow to determine if a seller credit is disclosed on the CD as a lump seller credit or as individual fees disclosed in the “seller-paid” column on page 2. Per Reg. Z , in order for banks to disclose seller credits as individual fees paid by the seller, the specific fees the seller credit will cover must be stated/outlined in the sales contract. However, if the sales contract only has a general statement, for example, “ the seller will pay up to $5000 (or up to 3%) toward buyer’s closing costs”, we must disclose the seller credit as a lump seller credit on the CD to comply with TRID regulations.

VA requires all seller credits to be disclosed on the CD as individual fees “paid by seller”, regardless if the legal sales contract instructs how the credit is allocated or not.

Summary:
By banks adhering to the CFPB’s TRID rules, there may be instances in which we are not permitted to itemize the seller credit on the CD. However, VA will identify this as a deficiency of its requirements and require banks to provide a refund payment to the borrower for fees in your “unallowable” category. If banks disregard TRID requirements and disclose all seller credits as “paid by seller” on page 2 of the CD; we potentially increase our Regulatory Risk exposure.
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This is a tricky issue for VA loans. We decided to establish a method for itemizing seller credits to the fees on VA loans starting with all fees that the veteran is prohibited from paying and then going with the largest other fees until the seller credit runs out, or leave the remaining as a general seller credit (forget if VA has a problem with that or not). I believe, in essence, the VA program can maintain adherence with TRID because one could argue the prohibition against the veteran borrower paying certain fees creates a de facto specified contract that seller credits must be itemized towards the fees the borrower is not legally liable for.