President & Managing Director
Lenders Compliance Group
This is the fifth article of a six-part
series devoted to TILA-RESPA Integration Disclosure. Although the series,
structured as White Papers, was initially established with four parts, I have
added a fifth Part and a sixth part to discuss additional features of the
Closing Disclosure. In this fifth part, I will discuss Page Three. The
sixth and final part of the series will provide an outline of Page Four and
Page Five. Through a review of important highlights, I invite you to join me in
a deep dive into the intricate features of the Closing Disclosure.
In the first article, I discussed
the mission of TILA-RESPA Integration and the Loan Estimate (LE).[i]
The second article introduced and treated the numerous features of the Closing
Disclosure (CD).[ii]
These two articles (viz., on the Loan
Estimate and Closing Disclosure, respectively) were accompanied by separate,
detailed tables to be used for certain itemized categories and action
requirements. In the third article, I provided the salient features of the Loan
Estimate, in considerable detail.[iii]
In the fourth article, I took you through Page One and Page Two of the Closing
Disclosure.[iv]
I would suggest that you read all
the articles in this series in order to better understand the TILA-RESPA
Integration Disclosure (TRID) rule promulgated by the Consumer Financial
Protection Bureau (“CFPB” or “Bureau”).
The series on TILA-RESPA is meant
to be informative, though it is not intended to be comprehensive. It is always
prudent to research areas of particular interest with respect to the regulatory
mandates. If assistance is needed, Lenders Compliance Group is a resource, and
we recently established two proactive paths toward a TRID knowledgebase:
(1) We
established the TEAM TRID™ task force,[v]
a relatively inexpensive, cost-effective way to get TRID integration
implementation done efficiently (viz., www.teamtrid.com); and importantly
(2) We
established TRIDHotline.com,[vi]
an entirely free online service,
manned by our task force, to assist people with their questions about TRID. We
want to listen to their compliance needs (viz., www.tridhotline.com).
Please consider my analysis
carefully. Follow along with a copy of the Closing Disclosure. I will provide,
where helpful, some information as Suggested
Guidance. Allow several hours to consider this explication. And
as I have admonished all along, make notes, raise questions, and seek answers
from competent compliance professionals!
Hopefully, you will have read the
previous four articles. Now we will continue a detailed review of the third
page of the Closing Disclosure. As indicated above, a forthcoming sixth article
will further elucidate the Closing Disclosure analyses for Page Four and Page
Five.
Page Three
TILA requires the Closing
Disclosure to contain two tables:[vii]
“Calculating Cash to Close” and “Summaries of Transactions.”[viii]
For transactions without a seller, the creditor or settlement agent may
substitute a “Payoffs and Payments” table for the Summary of Transactions table
and place it before the alternative Calculating Cash to Close table.[ix]
Calculating Cash to Close Table
General Description
TILA requires the creditor to
disclose the “cash to close;” that is, the total amount of cash or other funds
the consumer must provide at consummation, and how the creditor determines that
amount. The “Calculating Cash to Close” table generally mirrors the format of,
and updates the amounts shown on, the “Calculating Cash to Close” table in the
Loan Estimate. The purpose of this table is to provide the consumer with a
three-business-day window before closing to make arrangements to have the
necessary funds available for the consummation of the transaction.
The table on the CD includes a
row not included on the Loan Estimate, labeled “Closing Costs Paid Before
Closing,” and additional information under the column with the subheading “Did
this change?”[x]
Standard Calculating Cash to Close Table
The standard “Calculating Cash to
Close” table consists of four columns and nine rows. The columns are for the
(1) components of cash to close, (2) the estimated amounts of cash to close
(from the Loan Estimate) and its components, (3) the cash to close and its
components without rounding (Final), and (4) a “Did this change” (Yes or No).
Alternative Calculating Cash to Close Table
“Calculating Cash to Close” may
be used as a table for use in a transaction[xi]
without a seller when the Loan Estimate was disclosed with the optional
“Calculating Cash to Close” table.[xii]
Elements of Standard Calculating Cash to Close
Table
Total Closing Costs
The first row of the standard
“Calculating Cash to Close” table discloses a comparison of the consumer’s
estimated and actual “Total Closing Costs (J)” amounts, Item J from the Closing
Cost Details on the Loan Estimate and CD. If the actual amount on the CD
differs from the estimated amount on the LE (unless the difference is due to rounding),
the creditor or closing agent must state “YES” under the subheading “Did this
change?” and that the consumer should “See Total Loan Costs (D) and Total Other
Costs (I).”
The creditor or closing agent
also must state the dollar amount of any excess amount of closing costs above
the limitations on increases in closing costs (i.e., above the zero or 10%
tolerance), if applicable, along with language stating that the increase
exceeds the legal limits by the dollar amount of the excess.
Suggested
Guidance
·
The dollar amount of any excess amount of
closing costs, if applicable, must reflect the different methods of calculating
excess amounts under TILA.[xiii]
·
Because certain closing costs, individually, are
subject to the limitations on increases in closing costs under Regulation Z[xiv]
(i.e., origination fees, transfer taxes, and charges paid by the consumer to an
affiliate of the creditor, which are subject to the zero percent tolerance
rule), while other closing costs are collectively subject to the limitations on
increases in closing costs[xv]
(i.e., recordation fees and fees paid to an unaffiliated third party if the
creditor permitted the consumer to shop for the service provider, which are
subject to the 10% tolerance rule, the creditor or closing agent must calculate
subtotals for each type of excess amount and then add the subtotals together to
yield the dollar amount disclosed in the table.[xvi]
·
The calculation of excess amounts above the
limitations on increases in closing costs takes into account the fact that the
itemized, estimated closing costs disclosed on the Loan Estimate will not
result in charges to the consumer if the service is not actually provided at or
before consummation, and that certain itemized charges listed on the Loan
Estimate under “Servicers You Can Shop For” may be subject to different
limitations depending on the circumstances.[xvii]
·
The creditor or closing agent must refund to the
consumer any excess amounts at consummation or within 30 days after
consummation.[xviii]
Closing Costs Paid Before Closing
The second row in the standard
“Calculating Cash to Close” table (and the third row in the alternative table),
labeled “Closing Costs Paid Before Closing,” discloses a comparison of the
estimated and actual amounts of the “Total Closing Costs” paid before
consummation of the transaction. The figure for the Loan Estimate column is $0
because the Loan Estimate does not have an equivalent disclosure. The actual
“Closing Costs Paid Before Closing” amount that appears in the third (“Final”)
column is the amount disclosed on page 2 of the Closing Disclosure in the
“Borrower-Paid/Before Closing” column for “Closing Costs Subtotals (D+I).” If
the actual amount is different from the $0 Loan Estimate amount (unless the
difference is due to rounding), the creditor or closing agent must answer “YES”
under the fourth column subheading “Did this change?,” and state “You paid
these Closing Costs before closing.” The language is intended to remind the
consumer that he or she paid certain transaction closing costs before
consummation and that those costs will be subtracted from the actual cash to
close amount.[xix]
Closing Costs Financed
The third row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Closing Costs
Financed (Paid from your Loan Amount)” figure from the “Calculating Cash to
Close” table on the Loan Estimate and the actual “Closing Costs Financed”
amount. If the actual amount is different from the Loan Estimate amount (unless
the excess is due to rounding), the creditor or closing agent must state “YES”
under the fourth column subheading, “Did this change?,” and that the consumer
included these closing costs in the loan amount, which increased the loan
amount.[xx]
Down Payment/Funds from Borrower
The fourth row of the standard “Calculating
Cash to Close” table discloses a comparison of the “Down Payment/Funds from
Borrower” figure from the “Calculating Cash to Close” table on the Loan
Estimate and the actual “Down Payment/Funds from Borrower” on the Closing
Disclosure. Down Payment and Funds from Borrower are related concepts, but Down
Payment applies to a purchase transaction while Funds from Borrower relates to
a transaction other than a purchase. In a purchase transaction, the actual
amount of the “Down Payment\Funds from Borrower” is the actual amount of the
difference between the purchase price of the property and the principal amount
of the credit extended, stated as a positive number.[xxi]
In a transaction other than a
purchase, the actual amount of “Down Payment\Funds from Borrower” is determined
by subtracting the principal amount of the credit extended from the total
amount of all existing debt being satisfied in the real estate closing and
disclosed pursuant to Regulation Z[xxii]
(i.e., as Adjustments in Section K on Page 3 of the Closing Disclosure) -
except to the extent the satisfaction of the existing debt is disclosed under
“Other Costs” on page 2 of the Closing Disclosure. If the calculation yields a
positive number, then the positive number is disclosed; otherwise, $0.00 is
disclosed. If the actual amount of “Down Payment\Funds from Borrower” is
different from the amount on the Loan Estimate (unless the difference is due to
rounding), the creditor or closing agent must state “YES” under the fourth
column subheading, “Did this change?,” and state that the consumer increased or
decreased the payment, as applicable, and also that the consumer should see the
details disclosed under Section K or L, as applicable.
Deposit
The fifth row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Deposit”
amount shown on the Loan Estimate’s “Calculating Cash to Close” table and the
actual “Deposit” amount. The actual “Deposit” amount is the same amount shown
on line 01 under Section L (Paid Already by or on Behalf of Borrower at
Closing). If the actual “Deposit” amount is different from the Loan Estimate
“Deposit” amount (unless the difference is due to rounding), the creditor or
closing agent must indicate “YES” under the fourth column subheading, “Did this
change?,” and state that the consumer increased or decreased this payment, as
applicable, and that the consumer should see the details disclosed under
Section L.[xxiii]
Funds for Borrower
The sixth row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Funds for
Borrower” amount shown on the Loan Estimate’s “Calculating Cash to Close” table
and the actual “Funds for Borrower” amount. This amount is intended to
generally represent the amount to be disbursed to the consumer or used at the
consumer’s discretion at consummation, such as in cash-out refinance
transactions. The determination of whether the transaction will result in
“Funds for Borrower” is determined by subtracting from the total amount of all
existing debt being satisfied in the real estate closing (disclosed as
Adjustments in Section K on page 3 of the Closing Disclosure), except to the
extent the satisfaction of this existing debt is disclosed under “Other Costs”
on page 2 of the Closing Disclosure), the principal amount of the credit
extended, excluding any amount disclosed under Closing Costs Financed (Paid
from your Loan Amount). The exclusion of any amount disclosed under Closing
Costs Financed is necessary because that amount of credit extended has already
been accounted for in the Calculating Cash to Close table. If this calculation
yields a negative number, then the negative number is disclosed; otherwise $0
is disclosed.[xxiv]
If the actual amount of “Funds
for Borrower” is different from the estimated amount (unless the difference is
due to rounding), the creditor or closing agent must indicate “YES” under the
fourth column subheading, “Did this change?,” and whether the consumer’s
available funds from the loan amount increased or decreased, as applicable.
Seller Credits
The seventh row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Seller
Credits” disclosed on the Loan Estimate’s “Calculating Cash to Close” table to
the actual amount of Seller’s Credits disclosed on line 05 of Section L on the
Closing Disclosure. The “Final” amount must reflect any change, following the
delivery of the Loan Estimate, in the amount of funds given by the seller to
the consumer for closing costs or for allowances for items purchased
separately, as distinguished from payments by the seller for items attributable
to periods before consummation (which are considered “Adjustments and Other
Credits” separately disclosed on lines 08 through 11 of Section L). If the
actual amount of “Seller Credits” is different from the Loan Estimate amount
(unless the difference is due to rounding), the creditor or closing agent must
indicate “YES” under the fourth column subheading, “Did this change?,” and
state: “See Seller Credits in Section L.[xxv]
Adjustments and Other Credits
The eighth row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Adjustments
and Other Credits” disclosed on the Loan Estimate’s “Calculating Cash to Close”
table to the actual amount of “Adjustments and Other Credits” (for example,
prorations of taxes or homeowners’ association fees, utilities used but not
paid for by the seller, rent collected in advance by the seller from a tenant
for a period extending beyond consummation, and interest on loan assumptions).
This category also includes generalized credits toward closing costs given by
parties other than the seller. The actual amount equals the total amount of the
adjustments and other credits due from the consumer at consummation (the
amounts disclosed in Section K), reduced by the total amount of the adjustments
and other credits already paid by or on behalf of the consumer at consummation
(i.e., the amounts disclosed in Section L).[xxvi]
Suggested Guidance
·
If the actual amount of “Adjustments and Other
Credits” is different from the Loan Estimate amount (unless the difference is
due to rounding), the creditor or closing agent must indicate “YES” under the
fourth column subheading, “Did this change?,” and state that the consumer
should see the details disclosed under Sections K and L.
·
If the calculation yields a negative number, the
creditor or closing agent must disclose it as a negative number. If the “Final”
amount of “Cash to Close” yields a negative number, the creditor or closing
agent must disclose it as a negative number. The label “Cash to Close” must be
in boldface type.
Cash to Close
The final row of the standard
“Calculating Cash to Close” table discloses a comparison of the “Cash to Close”
amount from the Loan Estimate to the actual “Cash to Close” amount from the
bottom line of the Summaries of Transactions table on page 3 of the Closing
Disclosure. The two “Cash to Close” amounts also are the sums of the respective
amounts disclosed in the “Loan Estimate” and “Final” columns of the
“Calculating Cash to Close” table.[xxvii]
Suggested Guidance
If the “Final”
amount of “Cash to Close” yields a negative number, the creditor or closing
agent must disclose it as a negative number. The label “Cash to Close” must be
in boldface type.
Elements of the Alternative Calculating Cash to
Close Table
Alternative Calculating Cash to Close Table—General
Description
I have mentioned that there is an
alternative “Calculating Cash to Close” table for use with a transaction
without a seller for which the creditor has provided the optional alternative
“Calculating Cash to Close” table on the Loan Estimate and/or the alternative
“Costs at Closing” table on page 1 of the Closing Disclosure.[xxviii]
Like the standard table on the Closing Disclosure, the alternative table
mirrors the Loan Estimate’s alternative table except for updating the amounts
and including a row not included on the Loan Estimate, labeled “Closing Costs
Paid Before Closing,” along with additional information under the column with
the subheading “Did this change?” The “YES” or “NO” answers to this subheading
must be in capital letters and in boldface. In the event of a “YES” answer,
certain words in the narrative text also must be displayed more prominently
than other disclosures, as indicated below and in model Closing Disclosure form
H-25.[xxix]
Loan Amount
The first row of the alternative
“Calculating Cash to Close” table must state the Loan Amount - in the first
column, under “Loan Estimate,” the Loan Amount disclosed on the Loan Estimate;
and in the second column, under “Final,” the Loan Amount disclosed on the first
page of the Closing Disclosure. Then, in the third column, under “Did this change?,”
the creditor must indicate either “NO” or “YES.” If the answer is Yes, the
creditor must state, as applicable: “This amount increased” or “This amount
decreased,” or “You increased this amount” or “You decreased this amount.”[xxx]
Total Closing Costs
The creditor must complete this
row of the alternative “Calculating Cash to Close” table according to the same
instructions described above for the corresponding row of the standard table.[xxxi]
Closing Costs Paid Before Closing
The creditor must complete this
row of the alternative “Calculating Cash to Close” table according to same
instructions described above for the corresponding row of the standard table.[xxxii]
Total Payoffs and Payments
The fourth line, “Total Payoffs
and Payments,” discloses the total of all payments to third parties not
otherwise disclosed in the “Loan Costs” and “Other Costs” tables earlier on
page 2 of the Loan Estimate and Closing Disclosure, as negative numbers. In the
third column, under “Did this change?,” the creditor must indicate either “NO”
or “YES.” If the answer is yes, the creditor must also state: “See Payoffs and
Payments (K).”
Suggested Guidance
·
Examples of these payments include, but are not
limited to:
o
payoffs of existing liens secured by the
property such as existing mortgages,
o
deeds of trust,
o
judgments that have attached to the real
property,
o
mechanics’ and materialmen’s liens,
o
and local,
o
state and federal tax liens;
o
payments of unsecured outstanding debts of the
consumer; and
o
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.[xxxiii]
·
The dollar amounts generally are shown to two
decimal places, unless otherwise required. As a result, any “Final” amount is
shown to two decimal places unless otherwise required. Any “Loan Estimate”
amount is shown to the nearest dollar amount,[xxxiv]
to match the corresponding estimated amount disclosed on the Loan Estimate. For
this reason, a “Final” amount could be a larger number that its corresponding
“Loan Estimate” amount when, in fact, the apparent increase is due solely to
rounding. Accordingly, each statement of a change between the “Final” amount
and “Loan Estimate” amount must be based on the actual, non-rounded estimate
that would have been shown on the Loan Estimate if it had been shown to two
decimal places rather than a whole dollar amount.[xxxv]
Cash to Close To or From Consumer
The fifth item in the optional
“Calculating Cash to Close” table is the absolute value of the sum of the
previous four lines disclosed with a statement of the estimated amount due to
or from the consumer - as “Cash to Close □ From □ To Borrower” (bold-face type
required) under the “Loan Estimate” and “Final” columns. In the third column of
this row, the creditor must list as “Closed Costs Financed (Paid from your Loan
Account)” the sum of the amounts disclosed as the final “Loan Amount” and the
final “Total Payoffs and Payments,” but only if this sum is greater than zero
and less than or equal to “Total Closing Costs (Borrower-Paid)” (line J) minus
“Closing Costs Subtotals” (D+I) on page 2 of the Closing Disclosure. If
applicable, the creditor must use this disclosure: “Closing Costs Financed
(Paid from your Loan Amount): $.”
Summaries of Transactions
We now move to the second section
on Page Three, entitled Summaries of
Transactions. Regulation Z generally requires the rest of page 3 of the
Closing Disclosure to contain the “Summaries of Transactions” table, which
summarizes the consumer and seller portions of the transaction.[xxxvi]
The heading “Summaries of Transactions” must appear as a tab with upper rounded
corners and a black background, along with the statement in boldface type, “Use
this table to see a summary of your transaction.”
The creditor or closing agent may
separate the Closing Disclosure into two disclosures, one reflecting the
consumer’s costs and credits only and one reflecting only the seller’s costs
and credits; that is, for the consumer’s disclosure, the seller’s side of the “Summaries
of Transactions” would be left blank, and for the seller’s disclosure, the
borrower’s side would be left blank or deleted.
By allowing this separation of
consumer and seller costs, it seems clear that the Bureau sought to balance
privacy concerns and more restrictive state law requirements with the mandated
combination of the existing TILA and RESPA disclosures, consistent with the
previous RESPA settlement statement requirements in RESPA.[xxxvii]
Even if the consumer and seller are given separate disclosures, a creditor may
still prepare, or require the settlement agent to prepare, a complete Closing
Disclosure to document compliance and to evaluate the transaction in accordance
with governmental loan program and secondary market requirements to underwrite
the loan.[xxxviii]
The creditor or closing agent may
attach additional pages to the Closing Disclosure to add lines, as necessary,[xxxix]
to accommodate the complete listing of all items required to be shown in the
Summaries of Transactions table and to include customary recitals and
information used locally in real estate closings (for example, a breakdown of
payoff figures, a breakdown of the consumer’s total monthly mortgage payments,
an accounting of debits received and check disbursements, a statement stating
receipt of funds, applicable stipulations between the consumer and seller, and
the date funds are transferred). The creditor or closing agent should place a
reference such as “See attached page for additional information” in the
applicable section of the Closing Disclosure.
Summary of Borrower’s Transaction
Due from Borrower at Closing
Next to the label “K. Due from
Borrower at Closing,” presented on a gray background, the creditor or closing
agent is required to disclose the total amount due from the consumer at
closing.[xl]
This amount is calculated as the sum of the items that follow in Section K,
including:
·
Sales Price of Property, on line K01, which is
the contract sales price of the property being sold in a purchase real estate
transaction, excluding the price of any tangible personal property if the
consumer and seller have agreed to a separate price for those items.[xli]
·
Sale Price of Any Personal Property Included in
Sale, on line K02 (if the consumer and seller agreed to a separate price for
personal property items).[xlii]
·
Closing Costs Paid at Closing (from item J in
the Closing Cost Details on page 2 of the Closing Disclosure), on line K03.[xliii]
·
Adjustments to these items, on lines K05 through
K06.[xliv]
·
Adjustments for items paid by the seller in
advance, on lines K08 through K15.[xlv]
Line K03 provides a subtotal of
the closing costs paid by the consumer at closing, from Item J on page 2 of the
Closing Disclosure. Lines K05 through K07 must include a description and the
cost of any additional items (“Adjustments”) owed by the consumer not otherwise
disclosed in Sections K and L (such as any balance in the seller’s reserve
account held in connection with an existing loan, if assigned to the consumer
in a loan assumption; any rent the consumer would collect after closing for a
period prior to closing; or the treatment of a security deposit), all of which
do not have a parallel amount disclosed under Seller’s Transaction.[xlvi]
Lines K08 through K15 must
include adjustments for items paid by the seller in advance, beginning with
City/Town Taxes on line K08,[xlvii]
County Taxes on line K09,[xlviii]
and Assessments on line K10.[xlix]
On each of these lines K08 through K10, the creditor or closing agent must
indicate the period for which the consumer is responsible for reimbursing the
seller for the item and the prorated amount due from the consumer at closing.
Lines K11 through K15 must include any other adjustments for items paid by the
seller in advance,[l]
such as additional taxes, flood and hazard insurance premiums for which the
consumer is being substituted as an insured under the same policy, mortgage
insurance in loan assumptions, planned unit development or condominium
association assessments paid in advance, fuel or other supplies on hand
purchased by the seller that the consumer will use when the consumer takes
possession of the property, and ground rent paid in advance.[li]
Suggested Guidance
·
For purposes of this disclosure, personal
property is defined by state law and could include items such as carpets,
drapes, and appliances.[lii]
·
Manufactured homes are not considered personal
property.[liii]
Paid Already By or On Behalf of Borrower at Closing
Regulation Z requires the
creditor or closing agent to itemize in Section L the amounts paid by or on
behalf of the consumer prior to closing, labeled “L. Paid Already by or on
Behalf of Borrower at Closing.”[liv]
With the label, the creditor or closing agent must disclose the total amount
paid by or on behalf of the consumer prior to closing, calculated as the sum of
the items that follow in Section L. The creditor or closing agent must disclose
the amount of the Deposit on line L01,[lv]
the Loan Amount on line L02,[lvi]
any Existing Loan(s) Assumed or Taken Subject to on line L03,[lvii]
any Seller Credit on line L05,[lviii]
other credits and adjustments,[lix]
and then “Adjustments for Items Unpaid by Seller.”[lx]
Calculation of Borrower’s Transaction
At the bottom of the “Borrower’s
Transaction” section of “Summaries of Transactions,” the creditor or closing
agent must include the label “CALCULATION” with a gray background. Underneath
appear three lines for “Total Due from Borrower at Closing (K),” “Total Paid
Already by or on Behalf of Borrower at Closing (L),” and “Cash to Close □ From
□ To Borrower” with the associated dollar amounts.[lxi]
Items Paid Outside Closing
The creditor or closing agent is
required to designate amounts paid outside closing with the phrase “Paid
Outside of Closing” or “P.O.C.”[lxii]
Any charges not paid from closing funds but otherwise disclosed as part of
Borrower’s Transaction must be marked “paid outside of closing” or “P.O.C.”
with a designation of the person making the payment.[lxiii]
Charges paid outside closing are not included in computing totals under
Borrower’s Transaction, although they reduce the relevant component(s) of the
items being added to determine cash to close.
Suggested Guidance
To be safe,
creditors and closing agents that choose to use the phrase rather than the
abbreviation should capitalize the words in the phrase “Paid Outside of
Closing,” because the main text of the regulation prevails over the Comment.[lxiv]
Summary of Seller’s Transaction
Summary of Seller’s Transaction—General
The right side of “Summaries of
Transactions” addresses the “Seller’s Transaction.” The “Seller’s Transaction”
is not completed when no seller is involved, such as in a refinance
transaction. The “Seller’s Transaction” roughly mirrors the “Borrower’s
Transaction.”
Due to Seller at Closing
If a seller is involved in the
transaction, the creditor or closing agent is required to disclose the total
amount due to the seller at closing, using the label “Due to Seller at
Closing.”[lxv]
This amount is the sum of the items disclosed in Section M of the “Seller’s
Transaction” side of the “Summaries of Transactions” table, excluding items
paid from funds other than closing funds.
Below this amount, the creditor
or closing agent must disclose on:
·
Line M01, the amount of the real estate contract
sale sales price of the property being sold, labeled “Sale Price of Property,”
excluding the price of any items of tangible personal property if the consumer
and seller have agreed to a separate price for those items.[lxvi]
·
Line M02, the sale price of any personal
property included in the sale but excluded from the Sale Price of Property,
labeled “Sale Price of Any Personal Property Included in Sale”.[lxvii]
·
Lines M03 through M08, the amount of other items
to be paid to the seller by the consumer under the contract of sale or other
agreement, such as charges not listed on the Loan Estimate or items paid by the
seller prior to closing but reimbursed by the consumer at consummation.[lxviii]
·
Lines M09 through M16, “Adjustments for Items
Paid by Seller in Advance,” beginning with “City/Town Taxes” on line M09,
“County Taxes” on line M10, and “Assessments” on line M11.[lxix]
·
For the items on lines M09 through M16, the
creditor or closing agent should include the period in which the consumer is
responsible for reimbursing the seller for prepaid amounts (if applicable), and
the prorated amount due from the consumer at closing.
Due from Seller at Closing
If a seller is involved in the
transaction, the creditor or closing agent must disclose the total amount due
from the seller at closing, using the label “N. Due from Seller at Closing.”[lxx]
The amount is the sum of items disclosed in Section N of the “Seller’s
Transaction” side of the “Summaries of Transactions” table, excluding items
paid from funds other than closing funds.
Below this amount, the creditor
or closing agent must disclose on:
·
Line N01, the amount of any excess deposit
disbursed to the seller before the closing, labeled “Excess Deposit.”[lxxi]
·
Line N02, the “Closing Costs Paid at Closing (J),”[lxxii]
from the subtotal amount listed under Item J in the Seller-Paid At Closing
column of the Closing Cost Details.
·
Line N03, the existing loans assumed by or taken
subject to at closing, labeled “Existing Loan(s) Assumed or Taken Subject to.”[lxxiii]
·
Line N04, the payoff amount of a first mortgage
loan, labeled “Payoff of First Mortgage Loan.”[lxxiv]
·
Line N05, the payoff amount of a second mortgage
loan, labeled “Payoff of Second Mortgage Loan.”[lxxv]
·
Line N08, any “Seller Credit,” for instance, the
total amount of money the seller will provide as a lump sum at closing to pay
for loan costs and other costs, designated borrower-paid at or before closing
under Loan Costs and Other Costs, not including costs disclosed as seller-paid
at or before closing under Loan Costs and Other Costs.[lxxvi]
·
Lines N06, N07, and N09 through N13, the
description and amount of any and all other obligations required to be paid by
the seller at the real estate closing, including any lien-related payoffs,
fees, or obligations.[lxxvii]
·
Lines N14 through N19, “Adjustments for Items
Unpaid by Seller,” beginning with City/Town Taxes on line N14, County Taxes on
line N15, and Assessments on line N16.[lxxviii]
Suggested Guidance
·
Any excess deposit disbursed to the seller by a
party other than the closing agent must be disclosed on line N01 if the party
will provide the excess deposit directly to the seller. Any amounts of the
deposit disbursed to the seller prior to closing must be disclosed on line N01.[lxxix]
·
Any real estate commissions disclosed under
Section H of Other Costs in the Closing Cost Details on page 2 must be the full
amount of the commission, regardless of the party who holds the deposit.
·
The amount of any outstanding balance or
balances of any lien(s) the consumer is assuming or taking title subject to,
and which is to be deducted from the sales price, must be disclosed on line N03
(more than one lien can be included in the amount).[lxxx]
·
If third or fourth loans are secured with liens
on the property, they are disclosed as Adjustments on lines N17 through N19.
·
The Seller Credit amount must include other
obligations of the seller to be paid directly to the consumer, such as credits
for issues identified at a walk-through of the property before closing.[lxxxi]
·
Adjustments would include any and all other
obligations required to be paid by the seller at closing, including any
lien-related payoffs, fees, or obligations.[lxxxii]
·
The satisfaction of existing liens by the
consumer that are not deducted from the sales price are disclosed under
Adjustments as paid outside of closing (P.O.C.).[lxxxiii]
·
Escrowed funds held by the closing agent for
payment of invoices related to repairs, water, fuel, or other utility bills
received after closing that cannot be prorated are disclosed under Adjustments
(on lines N18 through N19).[lxxxiv]
Calculation of Seller’s Transaction
At the bottom of the Seller’s
Transaction column of the “Summaries of Transactions” table,[lxxxv]
requires the creditor or closing agent to include the label “CALCULATION” with
a gray background. Underneath appear three lines for “Total Due to Seller at
Closing (M),” “Total Due from Seller at Closing (N),” and “Cash □ From □ To
Seller” with the associated dollar amounts.
As I stated above, the creditor
or closing agent to designate amounts paid outside closing with the phrase
“Paid Outside of Closing” or “P.O.C.”[lxxxvi]
Thus, any charges not paid from closing funds but otherwise disclosed as part
of Seller’s Transaction must be marked “paid outside of closing” or “P.O.C.”
with a designation of the party making the payment. Charges paid outside
closing are not included in computing totals under Seller’s Transaction.
[i]
Foxx, Jonathan, RESPA/TILA Integration –
Part I: Overview and Loan Estimate, pp 28-54, National Mortgage
Professional, October 2014
[ii]
Foxx, Jonathan, RESPA/TILA Integration –
Part II: Closing Disclosure and Action Plan, pp 26-50, National Mortgage
Professional, December 2014
[iii]
Foxx, Jonathan, Loan Estimate: Deep Dive
(Part III), pp 40-75, National Mortgage Professional, June 2015
[iv]
Foxx, Jonathan, Closing Disclosure: Deep
Dive – Pages One and Two (Part IV), pp
40-82, National Mortgage Professional, July 2015
[v]
www.teamtrid.com
[vi]
www.tridhotline.com
[vii]
Regulation Z § 1026.38(i)–(k)
[viii]
For description of the Closing Disclosure form, see Annotated forms for TILA-RESPA Integrated Disclosure, December 2013, Consumer
Financial Protection Bureau
[ix]
Page 3 of form H-25(J) in Appendix H of Regulation Z illustrates this option.
[x]
Regulation Z § 1026.38(i). Also see § 1026.38(e) for transactions without
sellers.
[xi]
Regulation Z § 1026.38(e)
[xii]
Regulation Z § 1026.37(h)(2)
[xiii]
Regulation Z § 1026.19(e)(3)(i) and (ii), also as illustrated by Comment
38(i)(1)(iii)(A)-1
[xiv]
Regulation Z § 1026.19(e)(3)(i)
[xv]
Idem
[xvi]
Comment 38(i)(1)(iii)(A)-2.i
[xvii]
Comment 38(i)(1)(iii)(A)-2.ii and iii
[xviii]
Regulation Z § 1026.19(f)(2)(v)
[xix]
Regulation Z § 1026.38(i)(2), and Comment 38(i)(2)(iii)(B)-1
[xx]
Regulation Z § 1026.38(i)(3)
[xxi]
Regulation Z § 1026.38(i)(4)
[xxii]
Regulation Z § 1026.38(j)(1)(v)
[xxiii]
Regulation Z § 1026.38(i)(5), and Comment 38(i)(5)-1
[xxiv]
Regulation Z § 1026.38(i)(6)
[xxv]
Regulation Z § 1026.38(i)(7)
[xxvi]
Regulation Z § 1026.38(i)(8), and Comment 38(i)(8)(ii)-1
[xxvii]
Regulation Z § 1026.38(i)(9)
[xxviii]
Regulation Z § 1026.38(e)
[xxix]
Comment 38(e)-2
[xxx]
Comments 38(e)-5, 38(e)(1)(iii)(A)-1
[xxxi]
Comment 38(e)(2)(iii)(A)-1 and -2
[xxxii]
Comments 38(e)(3)(i)-1 and 38(e)(3)(iii)(B)-1
[xxxiii]
Comment 37(h)(2)(iii)-1
[xxxiv]
As required by Regulation Z § 1026.38(t)(4)(i)(C)
[xxxv]
Comment 38(e)-3
[xxxvi]
Regulation Z § 1026.38(j)
[xxxvii]
Regulation X § 1024.9(a)(6)
[xxxviii]
Regulation Z § 1026.38(j), (k), and Comment 38(j)-1
[xxxix]
Comment 38(j)-2
[xl]
Regulation Z § 1026.38(j)(1)
[xli]
Regulation Z § 1026.38(j)(1)(ii)
[xlii]
Regulation Z § 1026.38(j)(1)(iii)
[xliii]
Regulation Z § 1026.38(j)(1)(iv)
[xliv]
Regulation Z § 1026.38(j)(1)(v)
[xlv]
Regulation Z § 1026.38(j)(1)(vi)
[xlvi]
Comment 38(j)(1)(v)-1 and -2
[xlvii]
Required by Regulation Z § 1026.38(j)(1)(vii)
[xlviii]
Required by Regulation Z § 1026.38(j)(1)(viii)
[xlix]
Required by Regulation Z § 1026.38(j)(1)(ix)
[l]
Required by Regulation Z § 1026.38(j)(1)(x)
[li]
Comment 38(j)(1)(x)-1 incorporates instructions for RESPA HUD-1 settlement
statement lines 106-112 contained in Regulation X, Appendix A. See also
Regulation Z § 1026.38(j)(1)
[lii]
Comment 38(j)(1)(ii)-1
[liii]
Comment 38(j)(1)(ii)-1
[liv]
Regulation Z § 1026.38(j)(2)
[lv]
Required by Regulation Z § 1026.38(j)(2)(i)
[lvi]
Required by Regulation Z § 1026.38(j)(2)(iii)
[lvii]
Required by Regulation Z § 1026.38(j)(2)(iv)
[lviii]
Required by Regulation Z § 1026.38(j)(2)(v)
[lix]
Required by Regulation Z § 1026.38(j)(2)(vi)
[lx]
Required by Regulation Z § 1026.38(j)(2)(vii)–(xi)
[lxi]
Regulation Z § 1026.38(j)(3), Comments 38(j)(3)(iii)-1 and -2
[lxii]
Regulation Z § 1026.38(j)(4)(i)
[lxiii]
Comment 38(j)(4)(i)-1
[lxiv]
Idem
[lxv]
Regulation Z § 1026.38(k)(1)(i)
[lxvi]
Required by Regulation Z § 1026.38(k)(1)(ii)
[lxvii]
Required by Regulation Z § 1026.38(k)(1)(iii)
[lxviii]
Required by Regulation Z § 1026.38(k)(1)(iv)
[lxix]
Required by Regulation Z §§ 1026.38(l)(1)(v) through (ix)
[lxx]
Required by Regulation Z § 1026.38(k)(2)(i)
[lxxi]
Required by Regulation Z § 1026.38(k)(2)(ii)
[lxxii]
Required by Regulation Z § 1026.38(k)(2)(iii)
[lxxiii]
Required by Regulation Z § 1026.38(k)(2)(iv)
[lxxiv]
Required by Regulation Z § 1026.38(k)(2)(v)
[lxxv]
Required by Regulation Z § 1026.38(k)(2)(vi), as applicable
[lxxvi]
Required by Regulation Z § 1026.38(k)(2)(vii)
[lxxvii]
Required by Regulation Z § 1026.38(k)(2)(viii)
[lxxviii]
Required by Regulation Z §§ 1026.38(k)(2)(ix) through (xiii)
[lxxix]
Comment 38(k)(2)(ii)-1
[lxxx]
Comment 38(k)(2)(iv)-1
[lxxxi]
Comment 38(k)(2)(iv)-2
[lxxxii]
Comment 38(k)(2)(viii)-1
[lxxxiii]
HUD’s RESPA Roundup, December 2010.
Also see Comment 38(k)(2)(viii)-2
[lxxxiv]
Comment 38(k)(2)(viii)-3
[lxxxv]
Regulation Z § 1026.38(k)(3)
[lxxxvi]
Op. cit. 63
