Lender Incentives for Borrowers
Cash or Cash-like Incentives for all Transaction Types: The lender may provide the borrower with a cash or cash-like (e.g., a gift card) incentive that is not reflected on the settlement statement provided that
- the amount of the incentive does not exceed $500, and
- no repayment is required.
Because the lender is not typically a party to the sales transaction, these types of lender incentives are not considered IPCs and, as a result, are not included in the IPC limit calculation. Furthermore, these incentives are not considered cash out to the borrower and do not have to be included in the cash back to borrower at closing calculation.
Pay Down of Existing Mortgage Balance for Eligible Refinance Transactions: For refinance transactions, incentives to the borrower in the form of a payment to pay off a portion of the mortgage loan being refinanced is not considered an IPC and, as a result, is not included in the IPC limit calculation. Furthermore, this incentive is not considered cash out to the borrower and it does not have to be included in the cash back to borrower at closing calculation.
See New Loan Requirements in B5-7-01, High LTV Refinance Loan and Borrower Eligibility for exceptions associated with high LTV refinance loans.
For additional information, see B3-4.1-02, Interested Party Contributions (IPCs).