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If a bank offers $1,000 off closing costs for a mortgage loan, is it required to list the lender credit on the Loan Estimate or the Closing Disclosure?

If a bank offers a coupon for $1,000.00 off closing costs for a mortgage loan (lender credit), is it required to list the lender credit on the Loan Estimate (LE) or may the bank just list it as a lender credit on the Closing Disclosure (CD)? The bank is concerned that in some cases the $1,000.00 may be more than the actual closing costs.

Lender credits must be listed on both the LE and the CD. Lender credits are similar to any other fees/charges—the lender must list them on both the LE and the CD for fee tolerance comparison purposes (§1026.19(e)(3)(i)). If the bank is concerned about providing a lender credit that exceeds the actual amount of closing costs, it may state that it will pay a specific fee, such as the appraisal fee, and not set a dollar amount, which gives the bank some flexibility. If the bank decides to provide a lender credit for a specific fee, it should make that clear on the coupon or any lender credit offer including verbal offers.

The small entity guide explains the specific lender credit option using an example of a decrease in a lender credit from the LE to the CD attributable to a decrease in the amount of the estimated appraisal fee:

[I]f 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).

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(February 2021)

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