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Updated over 2 years ago,

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Don Freshen
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Closing Disclosure Loan Calculations Page 5 - Refinance

Don Freshen
Posted

I have not done a mortgage or refi in a decade and am currently in process with a reputable credit union.  They use a third party for processing and servicing and my mortgage consultant got me a great rate as they were shooting up so I really want to follow through.  The problem is with my Closing Disclosure.  All the numbers are correct until I get to the page 5 Loan Calculations.  My lender was able to roll all my costs into the new loan so I am bringing no cash to closing.

The way the Total of Payments is calculating is:

Loan Amount + Total Interest paid over loan term (15yr) + prepaid interest + Loan Costs

All this seems appropriate if I pay all Loan Costs at closing.  But ALL my costs are rolled in so the Loan Amount includes all the Loan Costs already, so the Total of Payments is double counting the costs.  It should be using the payoff of my existing loan in place of Loan Amount OR deduct any loan costs that are included in the new loan principal, which is part of the new Loan Amount.

After pushing them to try and correct this their compliance refuses to change this number, make an addendum note or allow me to mark through it and put in a more correct number (payment X term mths).  I've researched this and found that the CFPB requires this number to be understated by no more than $100 but has no limit on overstatement.  And it sort of makes sense that they don't want borrowers to be told their total outlay is lower than it actually is but not care as much about overstating from a false advertising perspective.  But it's still odd.

I believe they are being honest in telling me that they are calculating it correctly, because code dictates that (I think).  So if this is true (the TOP is calculated as required), and knowing the purpose of the CD is to protect the borrower, and thousands of loans are closed every day.  How can such a simple math concept not be invoked to make the Total of Payments more accurate?

He tried to explain that this number was not meant to be a "total out-of-pocket cost" number, it was just for "reference".  I logically understand that, I'm an accountant.  But this document is not just for numbers people, it's for everyone.  And the description is simple and clear on what it is supposed to be.  So how could they let it be so wrong?  This would mean nearly every CD produced is incorrect, unless all the costs are paid at closing.  Is this really happening?

OR - is mine definitely NOT correct?  Are loan costs rolled in supposed to be deducted from the loan amount for the TOP and this particular broker's system doesn't calculate it correctly or they are making an entry error of some kind?

To date, I cannot get the CFPB to give me any additional info other than what's on their website, and nothing I've found specifically addresses what I'm talking about in detail.  On Bankersonline I found a couple posts, one of which a broker asking the group how he's supposed to explain the TOP to clients when he knows it's wrong, which is evidence this is not uncommon.  But that's all I've found.

Anyone that has more detailed knowledge of how and why this number is calculated, and more specifically whether or not there is anything specific about loan costs being rolled into the Loan Amount and how that's addressed I'd appreciate your feedback. The other numbers in this section are also wrong (Finance Charge, Amount Financed, APR, TIP) by varying amounts. Is there a good answer?

Thanks

Don

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