In a mortgage transaction, if we disclose a general lender credit on the Loan Estimate, can we then at closing apply that general credit to a specific fee on the Closing Disclosure paid by the lender? Or are we bound to give the lump sum lender credit that was initially disclosed? We are technically still giving the credit, just making it a specific lender credit.

General lender credits are just that. They are not specifically related to any specific closing costs. General lender credits should not be allocated to individual loan costs which the lender showed that the consumer was legally obligated to pay on the LE.

Ideally, you would show it as a specific lender credit when you first made the decision to do so. But, in a case where the lender is the one giving the credit, I would hazard to say a credit can be applied specifically up until the point when you do the initial CD, or possibly up until the final CD depending on the situation. The lender can document which fee they want to specifically apply the credit to at any point in time a lot easier than a seller. Besides, a specific lender credit may not show up on an LE anyway, as there is no place for a specific credit to be documented other than the all inclusive "Lender Credits" in Section J.

In determining good faith you would add the total of specific credits and general credits. So yes you could take a $500 general credit on the LE and specifically allocate it to pay the $500 settlement fee (or whatever) on the CD. Good idea too as it reduces the overall APR you have to show.

This is 100% supported in the preamble commentary and the reg. 1026.19(e)(3)(i) Commentary 5 Lender Credits:

The disclosure of “lender credits,” as identified in § 1026.37(g)(6)(ii), is required by § 1026.19(e)(1)(i). “Lender credits,” as identified in § 1026.37(g)(6)(ii), represents the sum of non-specific lender credits and specific lender credits. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures provided pursuant to § 1026.19(e)(1). Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee. Nonspecific lender credits and specific lender credits are negative charges to the consumer. The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated “lender credits” identified in § 1026.37(g)(6)(ii) and disclosed pursuant to § 1026.19(e) is an increased charge to the consumer for purposes of determining good faith under § 1026.19(e)(3)(i). For example, if the creditor discloses a $750 estimate for “lender credits” pursuant to § 1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with § 1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated “lender credits” disclosed pursuant to § 1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under § 1026.19(e)(3)(i). However, if the creditor discloses a $750 estimate for “lender credits” identified in § 1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of § 1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, if the creditor discloses a $750 estimate for “lender credits” to cover the cost of a $750 appraisal fee, but subsequently reduces the credit by $50 because the appraisal fee decreased by $50, then the requirements of § 1026.19(e)(3)(i) have been violated because, although the amount of the appraisal fee decreased, the amount of the lender credit decreased. See also § 1026.19(e)(3)(iv)(D) and comment 19(e)(3)(iv)(D)–1 for a discussion of lender credits in the context of interest rate dependent charges.

You can't show specific lender credits on the LE. You only show general. If you then allocate them on the CD to specific charges because that's what your credit is actually for, then it would offset ppfc if that was something being paid. You will show the payment in 'paid by other's and can use the [L] designation to show it was lender paid.

You combine specific and general lender credits on the LE. Using a general lender credit (as documented in your file) as an offset for specific APR fees is going to cause an understated APR. It is either one or the other regardless of whether you combine them on the LE for disclosure purposes.

Official Interpretation

17(c) Basis of Disclosures and Use of Estimates

Paragraph 17(c)(1)
19. Rebates and loan premiums. In a loan transaction, the creditor may offer a premium in the form of cash or merchandise to prospective borrowers. Similarly, in a credit sale transaction, a seller's or manufacturer's rebate may be offered to prospective purchasers of the creditor's goods or services. Such premiums and rebates must be reflected in accordance with the terms of the legal obligation between the consumer and the creditor. Thus, if the creditor is legally obligated to provide the premium or rebate to the consumer as part of the credit transaction, the disclosures should reflect its value in the manner and at the time the creditor is obligated to provide it.

I have found that hardly anyone tests APR on the LE only the final CD is what matters. However, if it was called into question any documentation from your LOS to show that the general lender credits on the LE were actually specific credits would suffice to clear that up. We use the old TIL itemization if its ever questioned and that has worked for us.

As part of our monitoring we always test the LE APR vs. CD APR... It may not be as common but I wouldn't hang my hat on the statement no one will.

Randy, 'combine' [your word] is the appropriate word. Add in the statement that I had made "that's what your credit is actually for" and your further clarification of "in accordance with the terms of the legal obligation between the consumer and the creditor" and it will tell you that an actual agreement of some sort between lender and borrower is needed to back this all up.

Interestingly though. If we, for instance, waive an origination fee [typically on something like multi-phase loans, or employee loans] we simply don't show the charge at all because it's not going to happen.

Wouldn't this be a cleaner way to 'show' a specific credit?

For a Section A charge - yes, I agree. No use providing a credit to pay yourself. For a section B or C charge - you would have to show the actual payment made to the third party.

I fully intended to edit the above to reflect that caveat. Got sidetracked...then second-guessed myself on 3rd party charges since we never do show a credit report fee we never pass on to a borrower and don't show it for any loans as it's not a cost to the borrower, ever.

Randy, would you mind clarifying? If a bank absorbed a credit report fee with all loan applications, why couldn't they leave them off the LE and CD altogether since the consumer will NOT be paying for it?


2.Services you cannot shop for.
Under the subheading “Services You Cannot Shop For,” an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop in accordance with § 1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.

(f) Closing cost details; loan costs. Under the master heading “Closing Cost Details” with columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others, all loan costs associated with the transaction, listed in a table under the heading “Loan Costs.”

Since that is from the CD, would it be a problem to omit the credit report fee from the LE, and then show it as lender paid on the CD? We're discovering that we've been losing a few dollars with some loans since we report we'll pay X amount, and then the credit report comes in lower, so we provide a lender credit for the difference after showing the credit report as lender paid. Trying to figure a better way out of this...

If they are not going to be legally responsible for the charge, it does not have to go on the LE.

Woohoo, THANKS!

I go by this where if they are not legally obligated, and it's a cost of doing business, then we no longer have to show it on LE or CD. I've not wavered on this.

https://www.bankersonline.com/forum/ubbthreads.php/ubb/showflat/Number/2039519

RR - thank you, I was so certain I had seen conversations (years ago, as you confirmed) regarding this and remember previously removing the fees altogether at a former institution under these principals.

Has anyone that feels if the fee is absorbed it is a cost of doing business been examined and had issues one way or another?

I need help understanding how to disclose a no cost loan properly. I just reviewed a loan that showed the appraisal as $150 on the Loan Estimate. Then on the Closing disclosure the appraisal fee is $400. The specific lender credit increased to cover this. This was no a changed circumstance. Is this ok? We would not have had to only charge $150 because that was what was disclosed on LE would we? The bank still paid the fee no matter what the cost was. The borrower paid nothing either way. I was just feeling weird because the appraisal fee would be a zero tolerance item but the borrower wasn't going to be paying it anyway because of specific lender credits.

In this case,because the appraisal fee is not a finance charge, listing it as a specific lender credit (paid by others column on page 3 of the CD) is fine.

Ok This makes me feel better. Since they have been unreasonable about some things with the TRID rules I was overanalyzing this I guess. Thanks for your reply.

Where do general lender credits go on the CD (for relocation costs or for attending a homebuyer seminar, for example)? Does this amount go in Section J. under "Lender Credits" on page 2 or is it simply listed on page 3 Section L. under "Other Credits"? I believe we'd simply place that the general lender credits on page 3, but looking for feedback, please.

Thank you.

General lenders credits are listed in Section J.

I'm glad I asked - thank you.

It may happen automatically through the magic of programming, but the general lender credits also appear in the Closing Costs entry in the Costs at Closing tab at the bottom of page 1 (at the end of the first line of print).