No, a certificate of compliance fee likely should not be included in the finance charge calculation, subject to the discussion below.

Regulation Z exempts certain real-estate related fees from the finance charge calculation, if the fees are bona fide and reasonable in amount. Fees for title examination, abstract of title, title insurance, property surveys, credit reports, and appraisals are all examples of exempt real estate related fees.

In Cook, Kane, Peoria and Will counties, the Residential Real Property Disclosure Act set up an anti-predatory lending database program. Under the Act, a title insurance company or closing agent must attach to the mortgage a certificate of compliance with the program requirements. Without the certificate, the mortgage is unrecordable.

In our view, the certificate of compliance fee is similar to these other types of real estate related fees, and therefore should be excluded from the finance charge calculation, so long as it is bona fide and reasonable in amount.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.4 (“The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.”)

• Illinois Residential Real Property Disclosure Act, Predatory lending database program, 765 ILCS 77/70 (“The title insurance company or closing agent shall attach to the mortgage a certificate of compliance with the requirements of this Article, as generated by the database. If the transaction is exempt, the title insurance company or closing agent shall attach to the mortgage a certificate of exemption, as generated by the database. If the title insurance company or closing agent fails to attach the certificate of compliance or exemption, whichever is required, then the mortgage is not recordable.”)

• Regulation Z, 12 CFR 1026.4(c)(7)  (“The following charges are not finance charges: . . . (7) The following fees in a transaction secured by real property or in a residential mortgage transaction, if the fees are bona fide and reasonable in amount: (i) Fees for title examination, abstract of title, title insurance, property survey, and similar purposes. (ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents. (iii) Notary and credit report fees. (iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations. (v) Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.”)