5501.6: Lender credit (07/25/18)

Lender credit may be used for the Mortgage transaction provided it meets all of the following requirements:

The amount of the lender credit must:
- Be derived from an increase in the interest rate (i.e., premium pricing), or
- Be funded directly by the Seller
The lender credit must not require repayment
The Seller must not use funds from a third party to provide a lender credit
Lender credit may only be used as a credit towards the Borrower's Closing Costs. In the event the lender credit exceeds the amount of the Borrower's Closing Costs, the following requirements apply:
- The lender credit must be reduced so it does not exceed the amount of the Borrower's Closing Costs, or
- The amount of the lender credit that exceeds the Borrower's Closing Costs must be applied as a principal curtailment to the Mortgage, and must be clearly reflected on the Settlement/Closing Disclosure Statement. (SeeSection 6302.32 for delivery requirements for Mortgages with principal curtailments.)
Lender credit derived from an increase in the interest rate (i.e., premium pricing) must not be used as a credit towards funding a temporary subsidy buydown plan on a "no cash-out" refinance Mortgage

ACES IQ Reference Materials