IBA Compliance Connection

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We required a borrower to pay off existing credit card balances as a condition of receiving a loan to purchase a new home. The payoff will not be deducted from the loan proceeds; the borrower will pay off the debt out of pocket at the closing. Where should we list the credit card payments on the Closing Disclosure?

Feb 2, 2018

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We believe the appropriate place would be Section K, Line 04 — Due from Borrower at Closing.

In our view, there are no provisions in Regulation Z that directly address whether and where to disclose the payoff of a borrower’s credit card balance prior to their receipt of a loan on a Closing Disclosure. However, the CFPB’s Guide to the Loan Estimate and Closing Disclosure forms indicates that “payoffs of other secured or unsecured debt” — which would include credit card payoffs — should be included in Section K, Line 04, under “Due from Borrower at Closing.”

For resources related to our guidance, please see:

CFPB’s TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms, pg. 93 (“Disclose other consumer charges owed by the consumer in the real estate closing not otherwise disclosed in the Loan Costs table, Other Costs table, or Section K of the Closing Disclosure. Generally, these amounts may be disclosed on Line K.04. Examples include: . . . Payoffs of other secured or unsecured debt, . . .”)

Regulation Z, 12 CFR 1026.38(j)(1)(v) (“Under the heading ‘Summaries of Transactions,’ with a statement to ‘Use this table to see a summary of your transaction,’ . . . The first table shall include, under the subheading ‘Borrower’s Transaction,’ the following information and shall satisfy the following requirements: . . . labeled ‘Due from Borrower at Closing’ [Section K] . . . (v) A description and the amount of any additional items that the seller has paid prior to the real estate closing, but reimbursed by the consumer at the real estate closing, and a description and the amount of any other items owed by the consumer at the real estate closing not otherwise disclosed pursuant to paragraph (f), (g), or (j) of this section;”)