We recommend referring to charts published by the National Credit Union Administration (NCUA) that outline the charges that should be included and excluded from the HOEPA points and fees calculation. Also, the CFPB has released a small entity compliance guide that walks through each category of charges included in the points and fees calculation. Both items are linked in our resources below.

As to the title company fees, whether they are treated as prepaid finance charges depends on whether they fall into the “finance charge” definition in Regulation Z and qualify as prepaid. Title company fees are treated as finance charges if your bank: (1) requires the service for which the consumer is charged, (2) requires the imposition of the charge, or (3) retains a portion of the third-party charge. The charges are considered prepaid if the charge is paid separately in cash or by check before or at consummation of the transaction, or if it is withheld from the proceeds of the credit at any time. Additionally, all title company fees that are considered finance charges are included in the HOEPA points and fees calculation, unless the fee is not retained by the creditor. You may need to analyze each title company fee separately to determine whether you are requiring the service or the imposition of the charge, and whether you are retaining any portion of the charges.

As to including title company fees in the HOEPA points and fees calculation, that answer depends on the factors outlined in Section 32 of Regulation Z. As stated in Section 32, you may exclude bona fide third-party charges such as title company fees from the HOEPA points and fees calculation — provided that the charges are not retained by “the creditor, loan originator, or an affiliate of either, unless the charge is required to be included in points and fees under paragraph (b)(1)(i)(C), (iii), or (iv) of [Section 32].” Paragraphs (b)(1)(i)(C) and (iv) of Section 32 would not apply to title company charges, as they cover premiums paid for private mortgage insurance and credit and debt cancellation insurance.

Paragraph (iii) of Section 32 generally covers “real-estate related fees,” which would include title company fees — but  you may exclude such charges from the HOEPA points and fees calculation if they are reasonable, you receive no direct or indirect compensation in connection with the charges, and the charges are not paid to your affiliate. Again, you may need to analyze each title company fee separately to determine whether you have met the conditions to exclude them from the HOEPA points and fees calculation.

For resources related to our guidance, please see:

• NCUA, HOEPA Loans under the Dodd-Frank Act (The “HOEPA Points and Fees Test” chart lists “Finance Charges and Other Items Included” and “Finance Charges and Other Items NOT Included”)

• CFPB Small Entity Compliance Guide, Home Ownership and Equity Protection Act (HOEPA) Rule (November 2018), page 20 (“Section 3.8 – How do I calculate points and fees? To calculate points and fees, add together the amounts paid in connection with the transaction or the open-end credit plan (as applicable) for the categories of charges listed in Sections 3.8.1 through 3.8.8 below.”)

• Regulation Z, 12 CFR 1026.32(b)(1) (“In connection with a closed-end credit transaction, points and fees means the following fees or charges that are known at or before consummation . . .

(i) All items included in the finance charge under § 1026.4(a) and (b) . . .

(ii) All compensation paid directly or indirectly by a consumer or creditor to a loan originator, as defined in § 1026.36(a)(1), that can be attributed to that transaction at the time the interest rate is set . . .

(iii) All items listed in § 1026.4(c)(7) (other than amounts held for future payment of taxes) . . .

(iv) Premiums or other charges payable at or before consummation for any credit life, credit disability, credit unemployment, or credit property insurance, or any other life, accident, health, or loss-of-income insurance for which the creditor is a beneficiary, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract;

(v) The maximum prepayment penalty, as defined in paragraph (b)(6)(i) of this section, that may be charged or collected under the terms of the mortgage loan; and

(vi) The total prepayment penalty, as defined in paragraph (b)(6)(i) or (ii) of this section, as applicable, incurred by the consumer if the consumer refinances the existing mortgage loan, or terminates an existing open-end credit plan in connection with obtaining a new mortgage loan, with the current holder of the existing loan or plan, a servicer acting on behalf of the current holder, or an affiliate of either.”)

• Regulation Z, 12 CFR 1026.32(b)(2) (“In connection with an open-end credit plan, points and fees means the following fees or charges that are known at or before account opening . . .

(vii) Any fees charged for participation in an open-end credit plan, payable at or before account opening, as described in § 1026.4(c)(4); and

(viii) Any transaction fee, including any minimum fee or per-transaction fee, that will be charged for a draw on the credit line, where the creditor must assume that the consumer will make at least one draw during the term of the plan.”)

• 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: (i) All items included in the finance charge under § 1026.4(a) and (b), except that the following items are excluded:

A. Interest or the time-price differential;

B. Any premium or other charge imposed in connection with any Federal or State agency program for any guaranty or insurance that protects the creditor against the consumer's default or other credit loss;

C. For any guaranty or insurance that protects the creditor against the consumer's default or other credit loss and that is not in connection with any Federal or State agency program:

• (1) If the premium or other charge is payable after account opening, the entire amount of such premium or other charge; or
• (2) If the premium or other charge is payable at or before account opening, the portion of any such premium or other charge that is not in excess of the amount payable under policies in effect at the time of account opening under section 203(c)(2)(A) of the National Housing Act (12 U.S.C. 1709(c)(2)(A)), provided that the premium or charge is required to be refundable on a pro rata basis and the refund is automatically issued upon notification of the satisfaction of the underlying mortgage transaction;

D. Any bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either, unless the charge is required to be included in points and fees under paragraph (b)(1)(i)(C), (iii), or (iv) of this section;

E. Up to two bona fide discount points paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed:

• (1) The average prime offer rate, as defined in § 1026.35(a)(2), by more than one percentage point; or
• (2) For purposes of paragraph (a)(1)(ii) of this section, for transactions that are secured by personal property, the average rate for a loan insured under Title I of the National Housing Act (12 U.S.C. 1702 et seq.) by more than one percentage point; and

F. If no discount points have been excluded under paragraph (b)(1)(i)(E) of this section, then up to one bona fide discount point paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed:

• (1) The average prime offer rate, as defined in § 1026.35(a)(2), by more than two percentage points; or
• (2) For purposes of paragraph (a)(1)(ii) of this section, for transactions that are secured by personal property, the average rate for a loan insured under Title I of the National Housing Act (12 U.S.C. 1702 et seq.) by more than two percentage points;”)

• Regulation Z, 12 CFR 1026.4(a)(2) (“Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor:

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.”)

• Regulation Z, 12 CFR 1026.2(a)(23) (“Prepaid finance charge means any finance charge paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time.”)

• Regulation Z, Official Interpretations, Paragraph 2(a)(23), Comment 2 (“Examples.

i. Common examples of prepaid finance charges include:

• A. Buyer’s points.
• B. Service fees.
• C. Loan fees.
• D. Finder’s fees.
• E. Loan-guarantee insurance.
• F. Credit-investigation fees.

ii. However, in order for these or any other finance charges to be considered prepaid, they must be either paid separately in cash or check or withheld from the proceeds. Prepaid finance charges include any portion of the finance charge paid prior to or at closing or settlement.”)

• Regulation Z, Official Interpretations, Paragraph 32(b)(1)(i)(D), Comment 1 (“In general, a creditor is not required to count in points and fees any bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either. For example, if bona fide charges are imposed by a third-party settlement agent and are not retained by the creditor, loan originator, or an affiliate of either, those charges are not included in points and fees, even if those charges are included in the finance charge under § 1026.4(a)(2).”)