BORROWER PAID vs. LENDER PAID BROKER COMPENSATION DISCLOSED ON THE LOAN ESTIMATE

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1 BORROWER PAID vs. LENDER PAID BROKER COMPENSATION DISCLOSED ON THE LOAN ESTIMATE Disclosing Broker Compensation on the Loan Estimate differs from how Broker Compensation is currently disclosed on the GFE. The main difference is that Borrower Paid Broker Compensation is disclosed on the Loan Estimate while Lender Paid Broker Compensation is not disclosed on the Loan Estimate. The following examples illustrate how both Borrower Paid and Lender Paid Broker Compensation are disclosed on the Loan Estimate and the Closing Disclosure. Any lender credit found in the following examples is a non-specific lender credit. The following loan characteristics are used for each example: SFR/OO/Rate & Term Refinance Estimated Property Value $250,000 Loan Amount $200,000 Broker Compensation 2.500% Credit Score 703 LLPA Escrow Waiver Yes LLPA Pricing from 07/14/2015 on Platinum s rate sheet for this program is: Rate & Price Chosen for Lender Paid Compensation & No Discount (Example 3) Rate & Price Chosen for Lender Paid Compensation with a Discount (Example 4) Rate & Price Chosen for Borrower Paid Compensation with no Discount (Example 1) Rate & Price Chosen for Borrower Paid Compensation with a Discount (Example 2) Any true discount paid to a creditor to reduce the interest rate must be disclosed in the first line of the Loan Costs on both the LE and the CD as Points. LE CD 1

2 EXAMPLE 1 BORROWER PAID COMPENSATION WITH NO DISCOUNT The Borrower Paid Compensation of 2.500% ($5,000) is disclosed as follows on the Loan Estimate (LE): The Lender Credit, if any, left after subtracting all LLPA s from the rate price is disclosed on Part J of the Loan Estimate. The amount of this credit is found on the Rate Lock Confirmation Sheet: In this example the net lender credit left after all adjustments is 0.625%, or $1,250, and is disclosed as follows on the Loan Estimate: This information would then be disclosed as follows on the Closing Disclosure (CD): 2

3 EXAMPLE 2 BORROWER PAID COMPENSATION WITH A DISCOUNT The Borrower Paid Compensation of 2.500% ($5,000) and the discount of 0.500% ($1,000) are disclosed as follows on the Loan Estimate (LE): The discount (Points) is reflected on the Rate Lock Confirmation Sheet: In this example no lender credit is disclosed on the Loan Estimate: This information would then be disclosed as follows on the Closing Disclosure (CD): 3

4 EXAMPLE 3 LENDER PAID COMPENSATION WITH NO DISCOUNT The Lender Paid Compensation of 2.500% ($5,000) is not disclosed on the Loan Estimate. A loan with the same Loan Costs as those in Example 1 above that has Lender Paid instead of Borrower Paid Compensation would look like the following: The Lender Credit, if any, left after subtracting all LLPA s & the Lender Paid Compensation from the rate price is disclosed on Part J of the Loan Estimate. The amount of this credit is found on the Rate Lock Confirmation Sheet: In this example the net lender credit left after all adjustments is 0.125%, or $250, and is disclosed as follows on the Loan Estimate: This information would then be disclosed as follows on the Closing Disclosure: 4

5 EXAMPLE 4 LENDER PAID COMPENSATION WITH A DISCOUNT In this example, while the Lender Paid Compensation of 2.500% ($5,000) is not disclosed on the Loan Estimate, the discount is disclosed on the Loan Estimate. A loan with the same Loan Costs as those in Example 3 above that also has a discount would look like the following: The discount, if any, is calculated by subtracting all LLPA s & the Lender Paid Compensation from the rate price is disclosed on Part A of the Loan Estimate as shown above. The amount of this discount is found on the Rate Lock Confirmation Sheet: In this example no Lender Credit is disclosed on the Loan Estimate: This information would then be disclosed as follows on the Closing Disclosure: 5