With the help of our clients, we continue to uncover situations that the CFPB may not have (could not have) contemplated. Occasionally a refinance loan will have negative Closing Costs, usually as a result of a credit for closing costs that is larger than actual closing costs. This becomes problematic when a strict reading of the applicable regulations is applied. 12 CFR §1026.38(e)(2)(ii) controls what should appear in the Final column of the “Total Closing Costs (J)” row on the alternative Calculating Cash to Close table of the Closing Disclosure. It states:
- Under the subheading “Final,” the amount disclosed under paragraph (h)(1) of this section, disclosed as a negative number;
When the circumstances as described above exist, the “Total Closing Costs (J)” amount is already negative, so the disclosure of the amount as negative results in an arithmetic sequence that does not result in the correct Cash to Close amount, if summed up manually.
To address this issue, we will be changing the CD generically to use math/logic to disclose the correct “Total Closing Costs (J)” amount by treating two (2) negatives as a positive, rather than following a problematic reading of the rule that results in a poor disclosure to the borrower. Please note that this update does not impact the existing calculations (which were already treating these numbers correctly), just how the information displays on the alternative Calculating Cash to Close table. So if, for example, “Total Closing Costs (J)” is -$500 due to a large credit for closing costs, the “Total Closing Costs (J)” amount on the alternative Calculating Cash to Close table of the Closing Disclosure would display as $500 rather than -$500. This allows the borrower to manually add the amounts in the Calculating Cash to Close table to arrive at the correct Cash to Close amount.
We will also be changing the field we use to populate the “Initial Escrow Payment” row of the “Escrow Amount” table of the “Loan Disclosures” section on page 4 of the CD to accommodate those rare situations where some LOS borrower-paid escrow amounts may potentially differ from total-paid escrow amounts. This will ensure that the total-paid escrow amount is always disclosed, regardless of how the LOS is passing escrow amounts.
These updates will take effect on September 3, 2016. If you have any questions or concerns about these two changes, please contact Client Support at 1.800.497.3584.
DR 205469 and 205351
Update: We are also changing the Total Payoffs and Payments (K) line in the Calculating Cash to Close section on the LE and CD in this same manner; if Total Payoffs and Payments (K) is negative (a very unlikely scenario), then it will print as a positive number in the Calculating Cash to Close table.
DR 208413