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How do I show fees that are collected by the lender but paid to a third party?

Understanding the Lender FBO fee structure and why it behaves differently on the Funding screen.

 What is "Lender FBO"?

"FBO" means "For Benefit Of." When you set a fee's payee type to Lender FBO, you're telling the system:

  • The lender retains the money by deducting it from the loan funding amount (the fee is netted out of the wire)
  • The lender is holding it for a specific third party (not keeping it for themselves)
  • The lender will forward that fee to the third party after closing, rather than the third party being paid directly out of the closing wire

The practical effect: the fee amount is bundled into what the lender funds, instead of being a separate payment to that third party. The borrower receives a lower loan disbursement because this amount is held back.

 

Key point

Lender FBO is how you show a third-party fee that is funded through the lender by reducing the loan amount, not disbursed separately at closing.

How it works

When you mark a fee payee as "Lender FBO," you're telling the system that the fee is being held by the lender at closing and will be sent to the third party after closing (not paid out of the wire directly).

  • The funded amount to the closing agent is reduced because the fee is deducted, as shown on the Funding screen
  • The lender holds this amount and remits it to the third party after closing
  • From a funding perspective, the money stays with the lender and is used to pay the third party

 

Use Lender FBO when a fee needs to be paid to a third party, but the lender is the one collecting and forwarding the money—not the third party getting paid directly at closing.

Common use cases for Lender FBO

These scenarios are perfect for the Lender FBO structure:

  • VA Funding Fee - Collected by the lender at closing, remitted by the lender to the VA after closing.

  • FHA Up Front Mortgage Insurance Premium (UFMIP) - Collected by the lender at closing, forwarded by the lender to FHA.

  • Government Fees (Recording Fees, Transfer Taxes) - When the lender collects these on behalf of a jurisdiction and remits them post-closing.


How it appears on the Loan Estimate and Closing Disclosure

When a fee is marked as Lender FBO, the "Paid To" field on the disclosure displays as: