Today I wanted to share the following article with you titles RESPA and Partial Credits on the GFE . It was written by Aaron Nelson, Product Development Manager, Prime Alliance Solutions, Inc.
“Recently Prime Alliance Solutions has received several inquiries around the topic of “Partial Credits” for Borrower Closing Costs, which might be paid for by the Lender. The questions center on how these might be shown on the GFE. As we all know by now, all Borrower Charges must be shown on the GFE regardless of who has offered to pay for them. Lenders are questioning how to show a Credit to offset the borrower’s charges should another party such as a Lender, Seller, or Other Party offer to pay for some of the borrower’s charges.
We presented a question to HUD to help determine how they categorize the transaction when the Lender or Selling is paying a portion of the Borrower’s closing costs. The response below indicates that this is a “Partial Credit”, and not a “No Cost Loan” as defined by HUD.
For a “No Cost Loan” all of the Lender’s Origination Charges on the GFE must be -0- in Box 1 and 2 and Line A must be -0- or show a credit equal to all Borrower Charges.
For a “Partial Credit” loan where the Borrower is paying some but not all of their Closing Costs HUD indicated that NO CREDIT is to show on the GFE. Credits may show on the HUD if a Lender, Seller, or Other Party pays for certain closing costs.
Based on HUD’s response, we will continue with our current approach to these types of Credits. Please see our 9.2 Release instructions below. Partial Credits based on HUD’s response should not appear on the GFE.
Questions to HUD:
- How would you recommend showing a Partial Credit towards Borrowers charges such as a Lender offering to pay for the Borrower’s Appraisal Fee? We understand the Appraisal Fee charge must show on the GFE as a Borrower Charge and the Lender’s Origination charges are going to be shown in Box A, so where and how does the credit show?
RESPONSE: Lender credits related to the rate quoted are shown in Block 2 Box 2 and Line 802 of the HUD-1. All other credits by the lender, not related to the rate quoted are shown in the 200’s section on page 1 of the HUD-1.
Anthony P. Romano, Esq.
Consumer Protection Compliance Specialist
U.S. Department of Housing
and Urban Development
Office of RESPA and ILS
- Is the definition of a “no cost loan” meaning there will be no “origination cost” and no “charge for Interest Rate” in Box 1 and 2 of the GFE such that Line A would be 0 as in “No Costs from the Lender”?
RESPONSE: See the GFE instructions at www.hud.gov/respa; for example:
In the case of “no cost’’ loans, where “no cost’’ refers only to the loan originator’s fees, Line A must show a zero charge as the adjusted origination charge. In the case of ”no cost’’ loans where “no cost’’ encompasses third party fees as well as the upfront payment to the loan originator, all of the third party fees listed in Block 3 through Block 11 to be paid for by the loan originator (or borrower, if any) must be itemized and listed on the GFE. The credit for the interest rate chosen must be large enough that the total for Line A will result in a negative number to cover the third party fees.
For additional details on how to set up a “No Cost” loan in your site Click Here to download the RESPA Partial Credits GFE PDF.”
As always, if you have any questions in regards to this information supplied by Prime Alliance, please contact your PA web administrator Rob Meijer 616-285-5711 x190 rmeijer@cuanswers.com
