TRID and a Decrease in the Seller Assist

Issue/Inquiry

The Bank is financing the purchase of a home. The buyer and seller have agreed to reduce the amount of the seller assist. Does the Bank have to send a revised Loan Estimate within three days of being notified of the change, or can this just be disclosed on the Closing Disclosure?

Response Summary

No revised Loan Estimate will be required, since closing costs are disclosed without reference to the party paying them and the change will not result in any fee being increased beyond what is permitted.

Response Detail

Generally, creditors are bound by the original Loan Estimate and can issue a revised Loan Estimate only under specific circumstances. Such include changed circumstances occurring after the Loan Estimate is provided to the consumer that cause estimated settlement charges to increase more than is permitted under the TILA-RESPA Integrated Disclosure (“TRID”) rules, or revisions to the credit or settlement terms requested by the consumer that cause the cost of an estimated service to increase. 12 CFR §1026.19(e)(3)(iv)(A), (C).

The creditor must deliver or place in the mail the revised Loan Estimate no later than three business days after receiving the information sufficient to establish that an appropriate reason for the revision has occurred. 12 CFR §1026.19(e)(4)(i).

In this case, the buyer and seller have changed the portion of the closing costs the seller will pay through a seller assist, which is an arrangement in which the seller will pay for closing costs ordinarily paid by the buyer. This will not affect the cost of any fee or increase it beyond what is permitted under the TRID rules, but only who will ultimately pay for the service or fee.

For the purposes of the Loan Estimate, all loan costs associated with a transaction are disclosed without reference to which party to the transaction might pay for the service. 12 CFR §1026.37(f).

Even though another party may ultimately pay for a fee, the goal of the TRID rules is to disclose to the consumer the costs of the transaction for comparison purposes and to illustrate the value of any credit. If the creditor is aware that the seller may be paying a particular fee, the amount of such fee should be included in the total amount of general seller credits that is disclosed as a part of the Cash to Close table. 12 CFR §1026.37(h)(1)(vi). This, however, will not affect the estimated cost of the service being paid.

Since the change requested for this transaction does not affect the estimated cost of a service or cause it to increase more than is permitted under the TRID rules, no revised Loan Estimate needs to be provided to the consumer. On the Closing Disclosure, the Bank will reflect the actual costs and the parties paying for such costs. 12 CFR §1026.38(f).

This entry was posted on Monday, August 28th, 2017 at 1:34 pm.