For a purchase transaction, we believe that the payoff amount for the land mortgage loan is part of the calculation used to determine the amount that should be placed on the “Closing Costs Financed” line of the Loan Estimate’s Calculating Cash to Close Table.

To calculate “Closing Costs Financed” for a purchase transaction (other than a simultaneous subordinate lien transaction), a lender takes the total loan amount and subtracts the estimated amount of payments to third parties not otherwise disclosed in the Loan Costs and Other Costs tables. Both the purchase price and “payoffs of secured or unsecured debt” — which would include the land mortgage payoff — are considered payments to third parties that should be part of the calculation. The resulting number from that calculation is listed as the Closing Costs Financed in the Calculating Cash to Close Table of a Loan Estimate.

For resources related to our guidance, please see:

• CFPB’s TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms, pg. 49, Loan Estimate, Calculating Cash to Close Table (“Closing Costs Financed (Paid from your Loan Amount) is calculated by subtracting the estimated total amount of payments to third parties not otherwise disclosed in the Loan Costs (see section 2.3.1 above) and Other Costs (see section 2.3.2 above) tables from the Loan Amount disclosed on page 1 of the Loan Estimate (see section 2.2.2 above). For a Purchase loan other than a simultaneous subordinate lien loan, the Sale Price is included in the Closing Costs Financed calculation as a payment to a third party. The Sale Price is not included in the Closing Costs Financed disclosure for a simultaneous subordinate lien loan, even if it is a Purchase transaction. Other examples of payments to third parties not otherwise disclosed in the Loan Costs or Other Costs tables include the amount of construction costs for transactions that involve improvements to be made on the property and payoffs of secured or unsecured debt. (Comment 37(h)(1)(ii)-1).”)

• Regulation Z, 12 CFR 1026.37(h)(1)(ii) Loan Estimate (“Under the master heading ‘Closing Cost Details,’ under the heading ‘Calculating Cash to Close,’ the total amount of cash or other funds that must be provided by the consumer at consummation, with an itemization of that amount into the following component amounts: . . . The amount of any closing costs to be paid out of loan proceeds, disclosed as a negative number, labeled “Closing Costs Financed (Paid from your Loan Amount)”)

• Official Interpretations, Regulation Z, 12 CFR 1026, Paragraph 37(h)(1)(ii), Comment 1 (“The amount of closing costs financed disclosed under § 1026.37(h)(1)(ii) is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed pursuant to § 1026.37(f) and (g) from the total loan amount disclosed pursuant to § 1026.37(b)(1). If the result of the calculation is a positive number, that amount is disclosed as a negative number under § 1026.37(h)(1)(ii), but only to the extent that it does not exceed the total amount of closing costs disclosed under § 1026.37(g)(6). If the result of the calculation is zero or negative, the amount of $0 is disclosed under § 1026.37(h)(1)(ii).”)