April 18, 2016
Clients and Friends,
The Department of Veterans Affairs (VA) on April 11, 2016 issued Circular 26-16-11, in which the VA explains how it expects the Closing Disclosure (CD) under the TILA-RESPA Integrated Disclosure rule (TRID) to be itemized.
The Circular also discusses the allowable charges on VA loans, as set forth under 38 C.F.R. § 36.4313, including the 1% additional charge. The Circular states that the CD must be completed accurately for the VA to determine that a loan complied with the fee restrictions.
The Circular presents two examples of a completed CD, which appear to show that VA requires lender and seller credits to be itemized to count against the 1% additional charge allowed. The first completed CD contains what it appears the VA intended to be a general Lender Credit, for which the VA states that, “the charges were still made to the borrower and the lender’s credit was not able to be itemized.” Please note that in its example, the VA placed the general Lender Credit under the “Paid by Others” column. However, this is not the correct placement under the TRID rule. Under the TRID rule, a general Lender Credit is disclosed under § 1026.38(h)(3) and “designated borrower-paid at closing.”
The second completed CD contains “itemized credits in the Seller-Paid and Paid by Others columns rather than charging the Veteran.” The Circular appears to state that this complies with the 1% limit. The Circular states that additional itemization of credits is not required by the VA as long as the charges to the borrower do not exceed the 1% limit. However, please note that additional itemization of credits may be required under the TRID rule, if they are provided for specific charges under the terms of the legal obligation.
The Circular also states that the VA requires a final borrower-signed copy of the CD on all loans. The Circular can be accessed at: http://www.benefits.va.gov/HOMELOANS/documents/circulars/26_16_11.pdf.
Please let me know if you have any questions.