If that is the only credit, yes the $15 will show in Block J, Lender Credits. Otherwise, it is aggregated with the other Lender Credits in that section.

ComplianceRegs you stated that after discussions with the CFPB you settled on the fact that a credit report that is never passed on would not be shown. What changed your mind?

This discussion chain .

The CFPB never gave me anything official (in writing) and prefaced it with the usual this opinion is not a substitute for the regulation language. As I previously mentioned, this one has continued to evolve and I see a number of people who have changed their stance from when this was first being discussed earlier this year. I still can see it both ways with what has been presented to date. It is still my opinion the charge and offsetting credit presentation is confusing to borrowers. That said, I will go with the safest option and disclose on the LE.

During that same CFPB call, the CFPB answered the following question as well:

Q) How does the creditor disclose charges for third-party administrative and processing fees that are currently rolled up in to Block 1 of the GFE? (1026.37(f)(1) and (f)(2)).

A) creditor generally decides the extent of the itemization of origination charges on the loan estimate except where the charge is required to be disclosed in a specific manner such as points under 1026.37(f)(1)(i) and loan level pricing adjustments charged to or passed on to the consumer as a charge per comment 37(f)(1)-5. To the extent that these charges are settlement services the consumer will pay for, the charge is itemized pursuant to 1026.37 (f)(2) as services the consumer cannot shop for.

In other words, if the creditor requires the consumer to pay for the third party settlement service in order to originate a loan, the charge must be itemized. The question as to whether an origination service that the creditor has contracted out to a third party is to be separately disclosed it is determined on whether the creditor requires the consumer to pay for that charge or if the creditor treats the charge as normal business overhead expenses such as rent, utilities, wages, etc.

The trouble with this response is that it's hard to understand why these charges if paid to a 3rd party but absorbed do not need to be disclosed, whereas a credit report fee "absorbed" by the lender must be disclosed and offset with a lender credit. I guess the answer is "just because the CFPB said so". I personally was surprised by the answer, because I would have thought that any (f)(2) charge would have to be disclosed and if paid by the lender, offset with a lender credit. Now it appears that we have to determine which charges are origination charges that were offset and absorbed and which are merely fees paid to 3rd parties. Here's an example showing how the CFPB's approach can result in a twisted result, in the old days banks would perform their own flood determinations but in recent years (the last decade) creditors have outsourced this work to 3rd party providers. We don't think of this as an origination charge, but in the old days the work associated with a flood check would have been included in a processing fee. In today's world we outsource and disclose the fee, offset with a lender credit when applicable. -- Now, I wouldn't try to avoid disclosing this charge as an "absorbed charge" but if you think about it, what makes this fee different than the "absorbed charges" that the CFPB indicated did not need disclosure?

Have you answered your own question? Perhaps the "absorbed charges" are those costs incurred by the bank when it does something in-house rather than outsource it. Appraisals might be an example for some lenders. Flood determination is an old example, as you've said. And in the really old days, a credit check might have been done in-house by calling around to other creditors. Of course the credit checks today are all done through credit reporting agencies for a fee, with direct checks being done less often.

Another example might be VOEs. That used to be an absorbed cost because employers hadn't yet figured out they could get paid for the information. But now we have more employers with their hands out and we'll see disclosures of those third-party payments.

The question answered related to third party admin and processing fees not fees for services the bank does in-house.

Terpsfan--the question was also tied to fees that are currently rolled into Block 1 of the GFE. So it appears that the CFPB is allowing the non-disclosure of "absorbed fees" only when the lender has absorbed a fee for a service it would have otherwise perfomed itself.

So John, my plan is to disclose credit report fees, flood check fees, etc. I'm torn on how to handle the employer charged VOE. We would not have estimated for the charge and we typically eat the fee, so I'm leaning toward not disclosing this one since it's kind of a hybrid. What do you think?

Well perhaps it would help to explain what "third-party admin and processing fees" comprises. Anyone want to take that on?

It really pushes lenders into passing on these fees to the consumer since when you are eating them you have to worry about the tolerance of the fee and the credit.

Okay, I'll take a stab.

If you are doing an in-house eval and you don't charge for them...you don't disclose them.

If you engage a credit bureau to pull credit and require credit to be pulled on a loan, you disclose it. If you pay for that service, you issue a specific credit.

If you require VOE and incur a charge from this 3rd party, you disclose and issue a credit or charge the customer.

Was that helpful at all?

RR -- I suppose since the VOE was required by the lender, the fee would have to be disclosed even if the bank absorbed it...I really would like to avoid this if there is an argument that can be made. This comes up when we must use a service that the employer has hired to complete the VOE requested by the bank. Since we never pass this charge along, in cases where it comes up we would need to disclose it and offset with a lender credit. I think we have a valid CIC so no tolerance issue here, but just a pain to ensure we make the revision within 3 business days, etc. Sigh...

Very much agree with you compconsult. It is aggravating and often an unknown upfront. We are beginning to see this random charge to verify employment status for ATR purposes.

Can anyone tell me why the credit report fee has to be shown in the first place if the lender always pays it? We never have passed the credit report fee on to the customer but we've always been told to show it.