TRID and Disclosing Seller-Paid Costs

Issue/Inquiry

The Bank asks whether there is a list of fees that the seller has paid which needs to be included on the consumer’s Closing Disclosure.

Response Summary

The TILA-RESPA Integrated Disclosure (“TRID”) rules of Regulation Z require that the Closing Cost details section on page 2 of the consumer’s Closing Disclosure disclose all closing costs, regardless of whether such were paid by the consumer or the seller. The Summaries of Transaction and Calculating Cash to Close tables on page 3 of the Closing Disclosure provide the actual terms of the seller’s transaction. If a copy of the consumer’s Closing Disclosure provided to the seller discloses the terms of the seller’s transaction, this will comply with the requirement. However, if separate Closing Disclosures are given to the consumer and seller, then the Closing Disclosure given to the consumer does not have to disclose the terms of the seller’s transaction and the Closing Disclosure given to the seller does not have to disclose the terms of the borrower’s transaction.

Response Detail

Under the TRID rules of Regulation Z, the Closing Disclosure is required to disclose the following closing costs on page 2, Closing Cost Details, under the following subheadings:

• Loan Costs
  • Origination Charges
  • Services Borrower Did Not Shop For
  • Services Borrower Did Shop For
• Other Costs
• Taxes and Other Government Fees
• Prepaids
• Initial Escrow Payments at Closing
• Other

Loan Costs and Other Costs that the seller has paid are required to be disclosed on the consumer’s Closing Disclosure, even when a separate Closing Disclosure is provided to the seller. The format of the Closing Disclosure has columns for disclosing Borrower-Paid and Seller-Paid costs as well as costs that are Paid by Others.  CFPB, Small Entity Compliance Guide: TILA-RESPA Integrated Disclosure Rule, 10.8.

A list does not exist for seller-paid Loan Costs, since it will be determined by the parties (the borrower or consumer and the seller) whether a cost is paid by the seller or borrower. With respect to seller-paid Other Costs, the official commentary notes that such include all real estate brokerage fees, homeowner’s or condominium association charges paid at consummation, home warranties, inspection fees, and other fees that are part of the real estate closing, but not required by the creditor or disclosed elsewhere in the Closing Disclosure. Official Interpretations, 1026.38(g)(4) – 1.

The official commentary offers seller-paid real estate commission as an example of seller-paid costs that must be included on the consumer’s Closing Disclosure in the Other Costs section. Additional charges made by real estate brokerages or agents to the seller or consumer are itemized separately as additional items for services rendered, with a description of the service and identification of the person ultimately receiving the payment. Official Interpretations, 1026.38(g)(4) – 4.

On page 3 of the Closing Disclosure, the Summaries of Transactions and Calculating Cash to Close tables are disclosed. These tables must provide the seller with the actual terms of the seller’s transaction. As such, the seller must receive a copy of the Closing Disclosure that discloses these terms. This requirement can be fulfilled by providing the seller with a copy of the Closing Disclosure that was provided to the consumer, so long as such Closing Disclosure contains the terms of the seller’s transaction. 12 CFR 1026.19(f)(4)(i); Official Interpretations, 1026.19(f)(4)(i) – 1.

The TRID rules permit the Bank to provide separate Closing Disclosures to the seller that relate to the seller’s transaction, and do not require the seller to receive the same version of the Closing Disclosure provided to the consumer. If the seller receives a separate Closing Disclosure, then the summary of the seller’s transaction in the consumer’s Closing Disclosure, which includes an itemization of amounts due to and from the seller, the calculation of the seller’s transaction, and items paid outside of closing funds, is not required to be disclosed to the consumer and may be left blank. Similarly, when providing the seller’s Closing Disclosure, the summary of the borrower’s transaction, including loan costs and other costs paid by the borrower, is not required to be disclosed to the seller and may be left blank. 12 CFR 1026.38(t)(5)(v).

In conclusion, if the Bank provides a single Closing Disclosure, then the copy of the disclosure provided to the consumer is required to include the terms of the seller’s transaction on page 3. However, if the Bank chooses to provide separate Closing Disclosures to the consumer and seller, then the disclosure provided to the consumer does not have to disclose the terms of the seller’s transaction and the disclosure provided to the seller does not have to disclose the terms of the borrower’s transaction. In addition, if the disclosure of the seller’s transaction is provided in a separate Closing Disclosure, the creditor must also receive a copy of the disclosure provided to the seller.

Nevertheless, while the terms of the seller’s transaction may be left blank on page 3 of the Closing Disclosure provided to the consumer, there is no parallel provision that permits the omission of seller-paid Loan Costs and Other Costs from page 2 of such disclosure.

Model form H-25(I) in Appendix H to Regulation Z illustrates the seller’s modified Closing Disclosure.

This response is for informational purposes only and is not intended for legal guidance.

This entry was posted on Tuesday, May 26th, 2020 at 9:18 am.