As a reminder to our Correspondent partners, CBC Mortgage Agency has posted guidelines related to the handling of seller paid closing costs and points and fees testing.
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Section 5.31 & 5.32 of the Correspondent Lending Guide
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These sections of our CLG address the treatment of lender- and seller-paid origination costs with respect to the calculation of points and fees under Regulation Z.
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CBC Mortgage Agency does not purchase loans that fail the QM Points and Fees Test. Correspondent Lenders are required to ensure all origination charges, including discount points as defined by CBC Mortgage Agency (not bona fide) are included as points and fees and do not exceed the QM threshold.
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It is common for transactions involving down payment assistance to include seller contributions towards closing costs and/or prepaid items. It is important to note that if a fee is charged to the buyer in Section A of the CD then that fee must be included in the points and fees calculation regardless of whether or not a seller concession is used to pay that fee. However, if a fee is charged to the seller and that fee is paid by the seller, the fee is not included in the points and fees calculation.
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If a loan fee is paid by the seller as a seller-paid fee, CBC Mortgage Agency requires that the attached Addendum (Appendix A: Addendum Regarding Seller or Lender Contributions) is executed prior to closing. Please keep in mind that all applicable seller contributions used to pay Section A / Origination Charges must be disclosed at the time of the Initial LE, and itemized as applied to Section A charges on the Initial CD.
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CBC Mortgage Agency believes this policy promotes responsible origination practices and protects both our borrowers and our correspondents.
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Should you have any questions, please contact your Corporate Account Director for more information. (If you do not have your Corporate Account Director’s information, please email info@chenoafund.org.)