In a webinar dated April 1, 2016, the BCFP (aka CFPB) provided the following guidance (quoted in relevant part):
“Q. One question we’ve received relates to amounts paid by the consumer before closing. . . . if the consumer pays for a service before closing and the service ends up costing less than the amount collected by the creditor, does the creditor disclose those excess funds as a lender credit?
A. No. The creditor would not disclose those excess funds as a lender credit. A lender credit is a payment, either specific or general, from the creditor to the consumer to pay for a fee, and it’s disclosed as a negative charge to the consumer, as explained in Comment 19(e)(3)(i)-5. However, the question posed relates to excess amounts paid by the consumer for a service before closing. . . .
Let’s consider an example . . . let’s assume that the consumer has received the Loan Estimate and has expressed an intention to proceed. The creditor then collects $500 from the consumer for a particular charge, let’s say for an appraisal. However, the appraisal winds up only costing $450. Therefore, there is an excess of $50 that the creditor already collected from the consumer and for which there needs to be an allocation of funds to charges that the consumer has paid before consummation.
The question is how the creditor accounts for the excess $50 collected from the consumer before closing and which was not needed for the appraisal service for which it was collected.
The creditor has at least two options for how to reconcile those excess funds paid by the consumer before closing. . . .
Alternatively, the creditor may disclose the full amount collected before closing for the appraisal service and then disclose a negative amount of $50 being given back to the consumer at closing on the same line for that service. But for that specific charge, the creditor would disclose negative $50 as paid by the consumer at closing and $500 as paid by the consumer before closing.” (see https://www.webcaster4.com/Webcast/Page/577/13784; Question 19; 52:38; special thanks to Buckley Sandler for providing an unofficial transcript, available here: https://buckleysandler.com/resources/april-2016-post-effective-date-questions-and-guidance)
While our system does support the disclosure of negative numbers in the “Closing Cost Details” tables on the CD, our system looks at the “Total Line Expense” to determine whether any values should be reflected in a line or left blank (i.e. whether a fee is charged or not). Although negative fee amounts are supported, in the narrow case that a creditor provides a full refund for a “paid outside of closing” item (e.g., discloses “$50” under “Borrower-Paid Before Closing” and “-$50” under “Borrower-Paid At Closing”), and the “Total Line Expense” is “$0”, the fee line will not print.
The BCFP’s webinar guidance is unofficial (and was not incorporated into subsequent TRID amendments), but to support those clients who wish to follow it, we will be changing our fee line logic to look at all of the individual pieces which comprise “Total Line Expense”, rather than this field’s value, to determine whether a fee needs to be disclosed or not. The fee subtotal amounts used in the logic include the borrower amounts paid at closing and outside of closing, the seller amounts paid at closing and outside of closing, and the amounts paid by others (creditors, brokers, etc). This change means that even for unusual circumstances where the total fee amounts for the line sum to $0, the fee line will still print.
These changes will take effect on June 26, 2018. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.