Why do lenders refuse to allow use of the “Seller Credit” lines when the contract requires the seller to provide a lump sum credit for closing costs?
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.
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.
07/18/2016