Q: Can lender credits change?
A: Yes, in certain circumstances. Lender credits, both specific and general, may always increase or may decrease if there is an accompanying changed circumstance or other triggering event under § 1026.19(e)(3)(iv).
For purposes of determining good faith and whether a change in lender credits results in an increased charge to the consumer, the total amount of lender credits, whether specific or general, actually provided to the consumer is compared to the amount of the “lender credits” identified in the Total Closing Costs on the Loan Estimate. (Comments 19(e)(3)(i)-5 and -6). For example, if the creditor discloses a $750 estimate for lender credits, but only $500 of lender credits is actually provided to the consumer, the creditor has a zero tolerance standard violation because the actual amount of lender credits provided is less than the estimated lender credits, and is therefore, an increased charge to the consumer. (Comment 19(e)(3)(i)-5)
Additionally, specific lender credits can impact the good faith tolerance analysis for their respective fees. For example, if the creditor discloses a $750 estimate for lender credits on the Loan Estimate to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the specific lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the good faith tolerance requirements because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, if the creditor subsequently reduces the specific lender credit by $50 because the appraisal fee decreased by $50, then the creditor has a zero tolerance standard violation because, although the amount of the appraisal fee decreased, the amount of the lender credit decreased. (Comment 19(e)(3)(i)-5)
But, if changed circumstances or other triggering events cause a lender credit to decrease, the lender would not be subject to a tolerance violation, assuming the other requirements for resetting tolerances are met and the legal obligation allows the decrease. For example, if the consumer enters into a rate lock agreement that causes the lender credit amount to decrease and the creditor provides a revised Loan Estimate reflecting the change no later than three business days afterwards, the lender credit decrease would not result in a zero tolerance standard violation. (Comment 19(e)(3)(iv)(D)-1). For the appraisal fee example above, if the reason the appraisal fee decreased by $50 was due to a change in the loan program and the legal obligation stated the creditor would pay for the appraisal, but not the specific amount, the lender credit decrease would not result in a zero tolerance standard violation (assuming compliance with the requirements for providing a revised Loan Estimate). A creditor must retain evidence of compliance with the requirements for the Loan Estimate. (§ 1026.25(c)(1)(i))
NOTE: General lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures, whereas specific lender credits are attributed to a specific fee.