Interesting situation -

We had a VA loan with no seller concessions. Sounds like the practice here is that to get the deal done, we lender pay some of the fees that the veteran is not allowed to pay for. We sent a check to the Pest Inspection company for $75 and it was subsequently returned to us because they said the seller had already paid for it. There doesn't appear to be any information that was available to us to indicate the seller would pay for this. Are we bound by the original lender credit for this item? Do we send the $75 to the borrower or track down the seller? Or, do we issue a corrected CD with the Pest Inspection itemized as Seller-Paid and keep the $75?

If you are talking about the termite inspection, I didn't think the buyer was allowed to pay for this charge on a VA loan.

Yes, exactly. That is why we paid it for the buyer. Turns out the seller had already paid it though.

Well. it should never had been on the LE as a charge or a credit as the borrower was not legally responsible for the payment to begin with. Sounds like the seller is the one that needs a revised CD to show them paying for it as POC..

Yes, I don't know how the LE looked. I never mentioned the LE. The CD is supposed to cover all aspects of the transaction though, even for the borrower, as I am sure you are aware. The current VA requirements are that they want everything itemized on Page 2 of the CD, regardless of who pays the fees. The seller may have paid at closing or before closing. All we know is we got a returned check and were told the seller paid the company. Does the rule say anything about providing a corrected CD to the seller? I agree it would make sense for the seller to receive a corrected CD, but I have not heard of this being done as a matter of process.

If you have an investor, then I would be contacting them. How can you complete a CD without knowing what the LE looked like? If you look at the seller's CD, which you have to have in your file, you can tell when they paid it. Who was the settlement agent?

19(f)(4)(ii) Timing. The settlement agent shall provide the disclosures required under paragraph (f)(4)(i) of this section no later than the day of consummation. If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes disclosures required under paragraph (f)(4)(i) of this section to become inaccurate, and such inaccuracy results in a change to the amount actually paid by the seller from that amount disclosed under paragraph (f)(4)(i) of this section, the settlement agent shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred.

VA has changed their stance on the pest inspections in recent years. VA Circular 26-14-10 (http://www.benefits.va.gov/homeloans/documents/circulars/26_14_10.pdf) clarified that it is considered an "unallowable fee" and then goes on to clarify that you can charge "unallowable fees" to the borrower as long as they do not make you exceed the 1% fee limit.

Also, VA's state deviations chart (http://www.benefits.va.gov/homeloans/documents/docs/state_deviations.pdf) specifically states the wood destroying insect inspection can be paid by the veteran in many states.

The guidance on this is all over the place, but I have been able to successfully argue that it can be paid by the borrower with several of our investors. My suggestion would be to call your VA RLC and ask them. VA is usually wonderful about answering lender questions and will probably clarify if the fee can be charged to the borrower in your area and might also be able to give guidance on your specific situation.

Thank you both your input.

I'm not the one completing the LE. I was trying to make the point that that was not really what I came on here to discuss/question. I came to see what to do about the returned check. I think RL pointed me in the right direction. As far as I know there are many mortgage banks that offer only a borrower focused CD and do not compare the settlement agent CD to the lender prepared. The settlement agent may have had it right in the first place.

As far as I know there are many mortgage banks that offer only a borrower focused CD and do not compare the settlement agent CD to the lender prepared.

That probably needs to change. Otherwise, how can you tell the borrower's CD is correct with the requirement to properly disclose all closing costs regardless of who pays them?

I agree. My boss and I used to try to argue for this type of review at the previous institution I worked for. It's just the way most places do it. Not sure why, I guess it is more of a burden. Takes an extra little bit of time that the production side doesn't want to "waste." My current company has the same process, and this is one of the "good" Mortgage Banks from a Compliance standpoint.