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Excess Credits and RESPA

Our client initially thought they had to disclose YSP on loans that they funded with their own money and they put it on the GFE which was issued after 1/1/2010. In order to give themselves extra room on the GFE they cushioned not only their estimated fees that go into block one but they added cushion to third party costs like title, etc. They were doing a no cost loan for the borrower so they put their fees plus the YSP in block one and then gave the borrower a credit for the YSP plus their estimate of all costs, both theirs and the third party vendors they were going to use. Now it’s time to prepare the HUD for closing and they realize now they do not need to show the YSP. Leaving the YSP off the HUD1 is fine because the HUd1 would just be lower than amount shown on the GFE. Here is the problem. The credit that they put on the GFE for their costs and third party costs now does not need to be that big because all the fees they are actually incurring are not that large. If the credit shown on the GFE has to match the HUD1, then not paying all of the costs for the borrower but they are essentially giving them money at closing. Seems like this is a good example of a RESPA problem where if you inflate the costs estimated at application do not inflate the corresponding credit. If you do you will be held to this credit at closing