Whether you can charge a flat $600 origination fee on a qualified mortgage under $80,000 will depend on the underlying loan amount and the total amount of other points and fees that you are imposing on the loan.
Regulation Z limits the points and fees that may be assessed for a qualified mortgage based on the amount of the loan. For example, Regulation Z limits the total points and fees for a loan between $60,000 and $100,000 to no more $3,000. Among other charges, “points and fees” include “finance charges,” which are any charges the creditor imposes that are incident to or a condition of extending credit. In our view, the origination fee described here is an incident to and/or a condition of extending credit and should be included in your points and fees calculation. (We do note that there are certain charges which could be considered to be “finance charges” under this definition that are excluded from the points and fees calculation, such as interest or the time-price differential; however, we do not believe the origination fee described here fits within the criteria for any of those exceptions.)
Consequently, in order to determine whether you can charge a flat $600 origination fee on a particular loan, you must ensure that the origination fee — together with all of the other points and fees — does not exceed the limits for that particular loan amount. In making this determination, you should note that the relevant loan amounts and limits on points and fees in Regulation Z are adjusted every year for inflation. The inflation-adjusted amounts for 2017 are listed in the Federal Register at 81 FR 41418.
For resources related to our guidance, please see:
-
Regulation Z, 12 CFR 1026.43(e)(3)(i)(B) (“Except as provided in paragraph (e)(3)(iii) of this section, a covered transaction is not a qualified mortgage unless the transaction’s total points and fees, as defined in § 1026.32(b)(1), do not exceed: . . . For a loan amount greater than or equal to $60,000 (indexed for inflation) but less than $100,000 (indexed for inflation): $3,000 (indexed for inflation)”)
-
Regulation Z, 12 CFR 1026.43(e)(3)(i) (Outlines points and fees limitations for all other loan amounts)
-
Regulation Z, 12 CFR 1026.32(b)(1)(i) (“In connection with a closed-end credit transaction, points and fees means the following fees or charges that are known at or before consummation . . anything considered a finance charge. . .”)
-
Regulation Z, 12 CFR 1026.4(a) (“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.”)
-
Regulation Z, 12 CFR 1026.37(f)(1) (“Under the subheading ‘Origination Charges,’ an itemization of each amount, and a subtotal of all such amounts, that the consumer will pay to each creditor and loan originator for originating and extending the credit.”)
- CFPB Final Rule, Truth in Lending (Regulation Z) Annual Threshold Adjustments (CARD Act, HOEPA and ATR/QM), 81 FR 41418 (June 27, 2016)