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The policy surcharge required by Sec. 627.7865, F.S. is described in Sec. 631.401(2), F.S. as a “governmental assessment.” As such it should be disclosed in Section E. Taxes and Other Government Fees. There is no hard and fast rule as to how it should be described on the CD, but it must include the reference “State of Florida” as the payee following the word “to” on that line.

Since it is not a component of title insurance, it should never be preceded by “Title -”.

NOTE: Lenders may have a different interpretation. Lender instructions should normally be followed since they are responsible for the content of the CD. We believe that if the lender asks for your assistance or advice, separately itemized in Section E would be the preferred placement.

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Page one displays the significant highlights of the transaction for the borrower. The cash to close entry at the bottom of the page is intended to provide the borrower with the exact amount needed to complete the transaction without explaining how the amount was determined.

The Calculating Cash to Close table at the top of page three compares the costs and cash to close as estimated on the Loan Estimate with the final costs and cash to close disclosed on the Closing Disclosure.

The cash to close entry at the bottom of page three displays the amount determined by subtracting the borrower’s credits in Section L from the borrower’s debits in Section K.

All three entries must be the same. If not, there is a problem with one or more entries on the CD. Often it is due to an improper calculation of the “Down Payment/Funds from Borrower” entry in the Calculating Cash to Close table.

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The regulations allow use of the Seller Credit lines in the Summaries of Transactions tables on page three for “a lump sum not otherwise itemized to pay for loan costs…and other costs…” (12 CFR § 1026.38(j)(2)(v)). The contractual reference that the credit is given for closing costs provides a lender the option of moving individual borrower closings costs into the seller’s paid at closing columns on page two until the amount of the credit is met. If any of these costs were included in the APR calculation the effect of these movements is to lower the loan’s APR disclosure.

You may recall that lenders frequently requested the same movement of costs on the original HUD-1 before the GFE/HUD rules came into play in 2010. On a GFE/HUD-1 this was not allowed by rule.

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Unlike the HUD-1 where settlement services were grouped together, the location of the individual services and products on the Closing Disclosure are primarily based upon whether the services are required to complete the loan transaction. Those connected to the loan are further categorized based upon who is providing the service and sometimes by the ability of the borrower to shop for a required service. Those not required to complete the loan transaction, like the Owner’s policy, are grouped together in Section H even though they may be required by the purchase and sale contract (e.g. real estate agent commissions; home warranty; seller-paid owner policy), are optional products or services chosen by the borrower (e.g. inspections; buyer-paid owner policy), or otherwise identified by TRID (e.g. association fees and charges).

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The lender will answer the shop or not shop questions. The lender is responsible for the Closing Disclosure and will determine the placement on the form of your fees and charges. Read More »

The Down Payment/Funds from Borrower line serves two distinct purposes. Down Payment is related to a purchase transaction while Funds from Borrower is used for all other transactions.

For purchase transactions, Down Payment simply represents the difference between the purchase price and the principal amount of the loan governed by this Closing Disclosure.

When there is no seller involved, Funds from Borrower represents the amount, if any, the consumer must bring to closing to complete this loan transaction. The software will calculate this sum for you.

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This depends on the reason for the credit. If the credit does not affect the potential value of the property, the change would fall into the same category as other changes which require a new version of the Closing Disclosure, but not a new three-day waiting period.

The credit will normally be disclosed within the borrower and seller Summaries of Transactions tables. If, however, it is a specific credit for a service itemized in one of the Closing Costs tables on page two, the credit will instead be reflected on that line.

If the credit is being given because a repair has not been made or the seller is removing fixtures or personal property the parties had previously agreed would stay, this may affect the appraised value of the property. Under other rules affecting appraisals, as well as the lender’s internal underwriting guidelines regarding appraised values and loan amounts, the need for a new Closing Disclosure and three-day waiting period is likely in this scenario.

Lenders are advising real estate agents to have walk-through inspections performed earlier than the day of closing. It is also important that sellers be informed of the potential delay in closing date if contracted repairs are not performed or appliances or other items are removed from the premises. Communication between all parties and their real estate agents is extremely important.

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