Calculating Cash to Close

We do not net fund. Our borrowers always bring a check to closing for their Total Closing Costs. These are "No Seller" transactions, i.e. Home Improvement, Home Equity. Where and how do you enter the closing costs on a non-seller transaction in the Calculating Cash to Close section without reducing the cash to the borrower, meaning that it shows the reduced loan money to the borrower?

See model H-25(G) Page 3

The model form does not address our situation. These are draw Home Improvement loans. No funds are being disbursed at funding. There are no payoffs to offset and reconcile the Calculating Cash to Close net figure, which should be the amount of the check from the borrower at closing. The model form is for refinances, where all funds are fully disbursed. We have had a title company use Section K for the full loan amount labeling it as "Construction Holdback". Essentially saying the loan amount is undisbursed at closing. This allows the loan amount to be subtracted from the calculation netting only the borrowers check as Cash to Close. Is this acceptable? The reg and any models provided do not reconcile, and actually contradict each other. Any advice?

I would treat this similar to a construction loan then:


The creditor may disclose this designated amount as a separate itemized cost along with a separate itemized cost for the balance of the construction costs in accordance with Section 1026.37(g)(4) in Section H of the Loan Estimate which provides for an itemization of any other amounts in connection with the transaction that the consumer is likely to pay at closing or that the consumer has contracted with a person other than the creditor or loan originator to pay at closing.

That still impacts the amount the borrower is paying at closing. We want the most effective/compliant way to reflect undisbursed funds that will go to the borrower in future draws on the Closing Disclosure.

How will that impact cash to close? They have a $20,000 home improvement contract and that is what would be shown in Section H.

You need to throw some actual numbers out here if we are going to be able to help you. We can't be specific when you are talking in generalities.

Let's use a $20,000 home improvement contract that will be disbursed in future draws, not at closing.

Ex: Calculating Cash to Close:
Loan Amount $20,000
Total Closing Costs -5,000 (Section J)
Closing Costs pd before Closing -0-
Total Payoffs & Payments -0- (Section K)
------------
Cash to Close 15,000 To borrower

This is what we are looking at, which is not a true statement. We are not providing loan funds at closing to the borrower, they will be disbursed in future draws. Is also incorrect, because the borrower brought a check to closing, as we do not net fund. So, where does the offset go for the undisbursed loan proceeds? As one title company recommended, can it go under Section K as undisbursed construction draws?

Is there a home improvement contract involved for $20,000? If there is, it can go in Section H as the CFPB described in my previous post.

If there is no contract, then I would say it belongs in Section K as the title company has suggested:

37(h)(2)(iii) Payoffs and payments.

1. Examples. Examples of the amounts incorporated in the total amount disclosed under § 1026.37(h)(2)(iii) include, but are not limited to: payoffs of existing liens secured by the property identified under § 1026.37(a)(6) such as existing mortgages, deeds of trust, judgments that have attached to the real property, mechanics’ and materialmans’ liens, and local, State and Federal tax liens; payments of unsecured outstanding debts of the consumer; and payments to other third parties for outstanding debts of the consumer (but not for settlement services) as required to be paid as a condition for the extension of credit.

I had attended a TRID Seminar hosted by the PA Bankers Assoc. The type of transaction described above seems like a construction loan with a holdback. If that is the case then we were advised to do it as rlcarey described above (listing the holdback in section H)

If you want to show the borrower bringing the loan costs to closing since you do not net fund, then you would simply list the 20,000 as the construction holdback. The remaining funds would be what needs to be brought to the table.

Ninky,

Can I ask how you all show this on the Loan Estimate? Do you do it similar to a short-term construction loan, or is it a long-term fixed loan? Variable or Fixed Rate? We are facing this scenario.