Earlier this year I mentioned my Southern Louisiana roots and defined Lagniappe as a little something extra. The Lagniappe provided answers to some of the more frequent questions we received during the first quarter. Since the year is quickly winding down, I thought I would provide a little something extra to wrap up 2018. Below are some of the most frequently asked questions and answers of the Fourth Quarter.
TRID - If the lender is aware that the seller has made an agreement with the borrower to pay for certain closing costs, is it okay to entirely omit those costs from the borrower's Loan Estimate?
Answer: Yes. Let's say you receive the consumer's application for a Purchase loan along with the sales contract prior to issuing your LE within 3 business days of application. According to the sales contract, the seller has agreed to provide a specific credit to cover the consumer's appraisal costs for the property being purchased. The recent amendments to the TRID Rule adopted the original proposal which clarified that anytime you are aware of such an agreement between the consumer and the seller, you may either disclose the cost of the service on the consumer's Loan Estimate along with an offsetting general seller credit in the Calculating Cash to Close table or you may exclude the seller paid amount from the Loan Estimate altogether.
For example, assume the appraisal costs $400. If the seller has agreed to pay for the appraisal on the consumer's behalf via a seller credit, then you may omit the appraisal from the Loan Estimate entirely OR you will disclose $400 in Section B of the borrower's LE with an offsetting seller credit of $400 in the Calculating Cash to Close table. You will still disclose the $400 fee in Section B of the borrower's CD in the "seller-paid" column as paid "before" or "at" closing, as applicable.
On the other hand, if the seller agreed to pay half of the service, then you may disclose $200 on the consumer's LE for the cost of the appraisal with an offsetting general seller credit of $200 in the Calculating Cash to Close table OR you could exclude the $200 seller paid amount from the LE altogether. If you remove the seller-paid portion from the borrower's LE altogether, then the borrower's Loan Estimate will reflect only the $200 due to be paid by the borrower per the sales contract. The Closing Disclosure, of course, will reflect $200 in the Borrower-paid column and $200 in the Seller-paid column, as applicable.
Keep in mind, this concept only applies when you have information from the buyer or seller such as a sales contract indicating a specific fee being paid by the seller on the borrower's behalf. On the other hand, if the sales contract indicates that the seller will simply pay a lump sum toward the borrower's closing costs, then such a general seller credit must be reflected in the Calculating Cash to Close table on both the borrower's Loan Estimate and Closing Disclosure as a Seller Credit, thus, reflecting the full amount of the fee on the LE and the CD in the Borrower-Paid columns, as applicable.
BSA - Beneficial Ownership - Can we use the same certification form if a legal entity customer opens two new accounts and the next day comes in to open another account?
Answer: Yes, you may rely on the same certification form when a legal entity customer opens multiple new accounts. However, you will need to document that the beneficial ownership is up to date and accurate for all new accounts, even when the account is opened the following day. Although most likely nothing changed, you will, however, need to confirm, either verbally or in writing, all information provided when the first two accounts were opened, is still up to date and accurate when the third account is opened. This is addressed in more detail in question #10 of the FinCEN FAQ's issued on April 3, 2018.
HMDA - Can you please explain the threshold for the new HMDA partial exemption for open-end lines of credit? We originated fewer than 500 open-end lines of credit in both 2016 and 2017.
Answer: Yes, to qualify for the partial exemption, an insured depository institution or insured credit union must have originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. Because you originated fewer than 500 open-end lines of credit in both 2016 and 2017, then you would qualify for the partial exemption when reporting open-end lines of credit on your LAR. Keep in mind, however, that the Institution Coverage threshold for even being required to report open-end lines of credit on your 2018 and 2019 LAR was temporarily increased from 100 to 500. With that being said, for your 2018 LAR, you would not even be required to report open-end lines of credit. Qualifying for the exemption does not require you to report open-end lines of credit with "exempt" data fields. The threshold for reporting open-end lines of credit will revert back to 100 in 2020, yet the threshold for the partial exemption does not change. As a result, institutions who are covered by the reporting threshold will not need to worry about testing for whether they qualify for the partial exemption until 2020.
Regulation CC - Can I use the reason "unable to verify funds" to place an exception hold?
Answer: The hold reason "unable to verify funds" does not appear to provide an "existence of facts that would cause a well-grounded belief in the mind of a reasonable person" that the check would be uncollectable. At the end of the day, it would depend upon your risk rating of the customer's account relationship as well as the type/amount of check being deposited.