RESPA Roundup-Using a Credit/Charge Calculation Prior to Completing Block 2 of the GFE

Compliance > Regulation X - RESPA > RESPA Roundups
Using a Credit/Charge Calculation Prior to Completing Block 2 of the GFE
 
Under RESPA, “[w]hen the net payment to the mortgage broker from the lender is positive, there is a credit to the borrower and it is entered as a negative amount in Block 2 of the GFE. When the net payment to the mortgage broker from the lender is negative, there is a charge to the borrower and it is entered as a positive amount in Block 2 of the GFE.”8 Note however that the FRB rules prohibit a loan originator (as defined by the FRB) from receiving compensation directly from the consumer when it has received compensation from any person other than the consumer in connection with the transaction.9
 

Example 3(a): Charge in Block 2.

Assume a loan with a principal balance of $250,000.  The lender charges $ 1,000 for
processing and administrative fees.  The mortgage broker’s compensation will be $2,000
which will be fully paid by the lender.  Thus, the total origination charge disclosed in
Block 1 is $3,000.

The interest rate chosen for the loan has a $2,000 credit. Loan level pricing adjustments
related to the loan result in a $2,500 charge. The resulting $500 charge would be placed
in Block 2 and box three would be checked.

The sum of Block 1 and Block 2 results in an adjusted origination charge in Line A of
$3,500.

See Example 3(a) in the March 2011 RESPA Roundup found here:  http://www.hud.gov/offices/hsg/rmra/res/mlocomplrodup31811v2.pdf

Example 3(b):  Credit in Block 2.

Assume a loan with a principal balance of $250,000.  The lender charges $ 1,000 for an
origination fee.  The mortgage broker will receive $2,000 in indirect compensation from
the lender.  Thus, the total origination charge disclosed in Block 1 is $3,000.

The interest rate chosen for the loan has a $2,000 credit. Loan level pricing adjustments
related to the loan result in a $ 1,500 charge. The resulting $500 credit would be placed
in Block two and box two would be checked.

The sum of Block 1 and Block 2 results in an adjusted origination charge in Line A of
$2,500.

See Example 3(b) in the March 2011 RESPA Roundup found here:  http://www.hud.gov/offices/hsg/rmra/res/mlocomplrodup31811v2.pdf

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